Pricing Strategies Overview

Podcast

Play an AI-generated podcast conversation about this lesson

Questions and Answers

What is the formula for calculating profit in target profit pricing?

Profit = (P × Q) + [FC + (UVC × Q)]

Profit = (P × Q) - (FC - UVC × Q)

Profit = Total Revenue / Total Cost

Profit = Total Revenue - Total Cost (correct)

In target return-on-sales pricing, which equation describes the target return?

20% = (TR - TC) / TR (correct)

20% = (TR + TC) / TR

20% = (TC - TR) / TR

20% = TR / TC

What pricing approach uses the concept of prices being set based on competitors' prices?

Above-, At-, or Below-Market Pricing (correct)

Dynamic pricing

Target profit pricing

Cost-plus pricing

Which of the following pricing strategies involves selling a product at a loss to attract customers?

Loss-Leader Pricing Signup and view all the answers

What does price serve as an indicator of in marketing?

Consumer Value Signup and view all the answers

What type of discount is based on the quantity of units purchased?

Quantity Discount Signup and view all the answers

Which markdown offers the highest total dollar savings?

From $86.00 to $69.99 Signup and view all the answers

Which term describes setting prices based on the concept of similar products found in the market?

Customary Pricing Signup and view all the answers

Which percentage discount off a $2,000 item represents the greatest total reduction?

25% off, then 25% off the reduced price Signup and view all the answers

In pricing terms, what does price fixing refer to?

Collusion between companies to set prices Signup and view all the answers

Which pricing strategy is illustrated by a 'Buy One Get One' offer?

Value Pricing Signup and view all the answers

What legal concept refers to charging different prices to different consumers for the same product?

Price Discrimination Signup and view all the answers

Which deal yields the best total discount on a $40 pair of pants?

Buy one, get 50% off the second Signup and view all the answers

Which pricing strategy adjusts prices frequently based on market demands?

Dynamic Pricing Policy Signup and view all the answers

What is a defining characteristic of value-pricing?

Setting prices based on consumer perception of worth Signup and view all the answers

What does predatory pricing aim to achieve?

To attract customers with low prices temporarily Signup and view all the answers

What is a common approach used in probabilistic selling?

Dynamic pricing based on demand Signup and view all the answers

Which of the following represents a common misperception about price as an indicator of value?

Higher prices always equate to better quality Signup and view all the answers

What is the profit equation used to calculate profit?

Profit = Total Revenue - Total Cost Signup and view all the answers

Which pricing objective focuses on maintaining profitability over a long period?

Managing for Long-Run Profits Signup and view all the answers

What is a primary factor influencing a product's pricing constraints?

Cost of Production and Marketing Signup and view all the answers

In which competitive market type does a single seller dominate the market with no close substitutes?

Monopoly Signup and view all the answers

What is the marginal cost in relation to total cost?

Cost incurred by producing one additional unit Signup and view all the answers

Which pricing approach sets prices based on competitors' strategies?

Competition-oriented Approaches Signup and view all the answers

What pricing strategy involves setting high initial prices to maximize revenue from customers willing to pay more?

Skimming Pricing Signup and view all the answers

Which factor does NOT typically shift the demand curve?

Production Costs Signup and view all the answers

Which type of pricing is used when products are sold together at a lower rate than if purchased separately?

Bundle Pricing Signup and view all the answers

What is total revenue defined as?

Selling Price multiplied by Quantity Sold Signup and view all the answers

Which of the following is a characteristic of odd-even pricing?

Prices ending in odd numbers create a perception of a lower price Signup and view all the answers

Which term describes the costs that do not change with the level of production?

Fixed Costs Signup and view all the answers

Which factor is NOT a key element of the profit equation?

Market Share Signup and view all the answers

What role does social responsibility play in pricing objectives?

It encourages ethical considerations in pricing. Signup and view all the answers

Study Notes

Pricing Lecture Notes

Pricing is a core element of the marketing mix
Identifying market needs involves understanding benefits, features, expenses, quality, and convenience of a product
Linking needs to actions involves translating customer needs into specific marketing actions.
Segmenting and targeting markets is crucial for effective marketing strategies.
A marketing mix comprises product, price, promotion, and place (distribution).
Price reflects the perceived value of a product or service.
Fair prices, reflecting quality and benefits, indicate good value.
Value-Pricing involves setting prices based on customer perception of value, rather than production cost.
Advance Selling involves selling a product before it's available.
Probabilistic Selling involves selling a product with uncertainty about its specifics until purchase.
BOGO (Buy One Get One) Deal increases perceived value for customers.
"77 & 7" Deal (77% plus 7% discount).

Question 1

Calculating savings involves subtracting the original price from the sale price to derive total savings.
Option A ($86 to $70) yields $16 savings.
Option B ($86 to $69.99) yields $16.01 savings.
Option C ($26 to $10) yields $16 savings.
- All options yield the same amount of total savings.

Question 2

Option A (50% off a $2,000 item) results in $1,000 savings.
Option B (25% off, then another 25% off the reduced price) results in $875 savings.
Option C (20% off, then 20%, then 20% off the reduced price) results in $1,125 savings.
Option C yields the largest percentage savings.

Question 3

Determining the best discount offer involves examining potential savings across different options.
Option A (Buy one, get 50% off the second) for a $40 pair of pants results in a $20 discount, and a total price of $60.
Option B ($20 off all purchases of $60 or more) for a $40 item yields no discount in this specific case.
Option C ($10 off the $40 pair) results in a $30 price.
Option A yields the best discount in this specific case.

Profit Equation

Profit = Total Revenue – Total Cost
Profit = (Unit Price * Quantity Sold) – (Fixed Cost + Variable Cost)
Revenue generated by sales minus the cost of producing and marketing a product is calculated as profit.

Pricing Objectives

Profit objectives focus on maximizing long-term and/or current profit.
Sales objectives aim to increase revenue or meet specific sales targets.
Market share objectives seek to maintain or increase market share.
Social responsibility objectives involve considering customer accessibility and ethical practices.

Pricing Constraints

Demand: Product class, product group, and brand.
Costs: Production and marketing costs.
Competitive Market Types: Pure competition, monopolistic competition, oligopoly, and monopoly.
Product: Stage in the Product Life Cycle.