Pricing Strategies in Marketing

Pricing method that bases prices on the cost of producing a product, plus a profit margin.

Pricing method that charges a fixed fee plus a variable fee based on usage.

Pricing based on the desired profit margin on a product; costs are a constraint.

Pricing strategy focused on a single product's price.

Strategy to decide on prices for multiple products or product lines at once.

Specific goals for pricing, such as maximizing profit or gaining market share.

Adds a markup percentage to the cost of production to arrive at the sale price for a product

Pricing techniques that may not account for changing costs or market conditions; they are not adaptable.

A business strategy offering a product for free initially, then charging for premium features or advanced versions.

How much demand changes in response to price changes.

A demand curve where quantity demanded decreases as the price rises beyond a certain point.

Research methods used to collect consumer opinions on products and services.

A company's own brand of products sold in its stores.

Products or trends with very short-lived popularity.

Charging fees to reduce traffic congestion.

Changes in consumer desire or need for a product.

Pricing strategies for new products, often lacking established market norms.

Setting a high initial price, then reducing it later.

Setting a low initial price to rapidly gain market share.

Setting a low, introductory price for consumers to try the new product.

Digital payment systems used for transactions.

A company using a skimming pricing strategy.

External forces affecting market pricing.

High, desirable price point for a product.

When competitors have difficulty entering the market due to high barriers or complexity, making it hard for them to challenge the high initial price.

A digital wallet app on your smartphone that allows you to make purchases and payments conveniently, store payment information like debit and credit cards, and often offers rewards.

Digital wallets can help improve access to financial services in nations with limited traditional banking systems.

Mobile wallets provide easy access to financial tools, offering convenience, security, and rewards. They are a faster and simpler way to manage money.

Mobile wallets store important information like your debit and credit card details, allowing you to make purchases without carrying physical cards.

Digital wallets offer a seamless and convenient way to make purchases and pay for goods and services, eliminating the need for physical cash or cards.

A situation where demand for a product doesn't significantly change even with price fluctuations. This means consumers are willing to pay higher prices for the product.

The initial phase of a product's life cycle, characterized by high demand for a new, innovative product.

Competitors offering similar or substitute products within the same market.

Reducing the cost of a product to stay competitive and attract more customers during later stages of the product life cycle.

Specific goals related to profitability when developing pricing strategies, such as maximizing profits or reaching a target profit margin.

Expenses incurred in researching and developing a new product, including research, testing, and design.

Expenses incurred on marketing and advertising a new product, such as launching campaigns and creating marketing materials.

The change in demand for one product due to a price change in another product. If products are substitutes, an increase in the price of one leads to increased demand for the other.

Charging different prices to different market segments for the same product. This allows businesses to cater to diverse needs and price sensitivities.

A product that can be used in place of another. When the price of one product increases, the demand for its substitute often rises.

How much the demand for a product changes in response to price changes. Different market segments can have different levels of price sensitivity.

It allows businesses to maximize revenue by capturing different price points from various market segments. They can offer higher prices to those willing to pay and lower prices to attract a wider audience.

Price planning involves setting pricing objectives, estimating demand, determining costs, analyzing competition, and selecting a pricing method.

Bartering is a form of exchange where goods, services, or other things of value are traded directly for other goods, services, or things of value, without the use of money.

Nonmonetary costs refer to factors like time, effort, and inconvenience that consumers consider when making purchasing decisions, even if they don't involve direct financial expenditure.

Pricing objectives are the goals a company aims to achieve through its pricing strategies.

Demand estimation is the process of predicting how much of a product or service customers will buy at different prices.

Cost determination involves calculating the expenses associated with producing and delivering a product or service.

Competition analysis involves studying the pricing strategies and offerings of rival companies to understand how they impact your own pricing decisions.

Pricing method selection involves deciding on the specific pricing strategy to use, such as cost-plus pricing, value pricing, or competitive pricing.

A pricing strategy where retailers consistently offer low prices on a wide range of products, often through efficient operations and supplier relationships.

EDLP allows businesses to attract customers looking for consistent value and affordability, while also building brand loyalty.

EDLP relies on achieving lower costs through efficient operations and negotiating favorable deals with suppliers, which allows for lower pricing.

Walmart, Home Depot, Office Depot, and Target are examples of successful retail chains that practice EDLP.

Cryptocurrencies, like Bitcoin or Ethereum, can be sent electronically, often faster than traditional bank transfers.

A pricing strategy where different prices are charged to different customers for the same product or service, aiming to maximize revenue by adjusting prices based on demand and capacity.

Yield management pricing works best when a service has a limited capacity, a perishable product or service, and different customer segments with varying willingness to pay.

Airlines offering different fares based on booking time, seat availability, and customer preferences.

Understanding price elasticity helps businesses make informed pricing decisions. It helps determine how much to raise or lower prices without significantly affecting demand.

Indicates high sensitivity to price changes. A small change in price can significantly impact demand.

Indicates low sensitivity to price changes. A price change has a minimal impact on demand.

Businesses can use understanding of price elasticity to implement effective yield management pricing strategies, maximizing revenue by charging different prices to different customer segments.

Skimming pricing works best when competitors have a hard time entering the market due to its complexity or high barriers. This makes it difficult for rivals to challenge the high initial price, allowing the company to make higher profits early on.

Digital wallets are apps that allow you to make purchases and payments easily. They store your payment info, like debit or credit cards, so you don't have to carry physical cards.

Penetration pricing sets a low price initially to quickly gain market share. It's like a 'come-and-get-it' approach to attract customers.

Mobile wallets offer convenience, security, and rewards. You can easily pay for things without cash or cards, and often get cashback or discounts.

It's an app on your phone that acts like a digital wallet. You can store payment info, make purchases, and even get rewards.

In places without strong banks, digital wallets provide a way for people to access money and make payments. It's like a financial lifeline.

The opposite is penetration pricing. Instead of starting high, it sets a low price to attract a large customer base quickly.

Mobile wallets are convenient, secure, and can offer rewards. It's a fast and easy way to manage your money.

A competitive process where buyers compete to offer the lowest price for a product or service. Essentially, the buyer with the lowest bid wins the auction.

Using pricing strategies that play on consumer psychology, such as using odd-even pricing or prestige pricing, to influence purchasing behavior.

A strategy where prices end in odd numbers (e.g., $9.99) to imply a lower price than an even number (e.g., $10.00). This is based on the assumption that consumers perceive odd numbers as lower.

Setting prices high to create a sense of exclusivity and luxury. This strategy assumes that consumers perceive high prices as an indication of superior quality.

The perceived value or worth of a product in the buyer's mind. Influenced by factors like brand reputation, previous experiences, and market conditions.

A mental price range that consumers consider appropriate for a particular product. This reference price is influenced by past purchases, advertising, and other sources.

A perception that there is a strong correlation between price and quality. Consumers often assume that higher prices indicate higher quality.

Two goods that are used together. An increase in the price of one product decreases demand for the other.

A payment method that allows consumers to pay for purchases in installments over time, similar to a layaway program.

Offering discounts for purchasing larger quantities of a product.

Predicting how much consumers will buy at different prices.

Demographic characteristics, such as age, income, or location.

Setting a price by adding a markup to the cost of production.