Marketing - Chapter 9
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Questions and Answers

What is the definition of price?

  • The amount of money charged for a product or service (correct)
  • The value customers perceive from a product
  • The revenue generated from a product
  • The total cost of producing a product
  • Which element in the marketing mix produces revenue ?

  • Product
  • Promotion
  • Place
  • Price (correct)
  • What are the three major pricing strategies ?

  • Psychological pricing, premium pricing, and discount pricing
  • Penetration pricing, skimming pricing, and value pricing
  • Dynamic pricing, bundle pricing, and freemium pricing
  • Customer value–based pricing, cost-based pricing, and competition-based pricing (correct)
  • What happens if customers perceive a product's price to be greater than its value ?

    <p>They won't buy the product</p> Signup and view all the answers

    What is the right pricing strategy ?

    <p>The one that delivers both value to the customer and profits to the company</p> Signup and view all the answers

    What does customer value-based pricing consider?

    <p>Buyers’ perceptions of value</p> Signup and view all the answers

    What are the types of value-based pricing mentioned?

    <p>Good-value pricing and value-added pricing</p> Signup and view all the answers

    What does good-value pricing offer?

    <p>Quality and good service at a fair price</p> Signup and view all the answers

    What does value-added pricing do to differentiate and charge higher prices?

    <p>Adds features and services</p> Signup and view all the answers

    What does cost-based pricing involve setting prices based on?

    <p>Production, distribution, and selling costs plus a fair rate of return</p> Signup and view all the answers

    What must pricing decisions be coordinated with?

    <p>Product design, distribution, and promotion decisions</p> Signup and view all the answers

    What are the potential reactions of a competitor to a company's price cut?

    <p>Interpret the price cut as an attempt to grab a larger market share or as a sign of poor performance</p> Signup and view all the answers

    What are the potential responses of a company to a competitor's price cut that is likely to harm its sales and profits?

    <p>Reduce its price to match the competitor’s price</p> Signup and view all the answers

    What could be a strategic move for a company to improve its position in response to a competitor's price cut?

    <p>Improve quality and increase price, moving its brand into a higher price– value position</p> Signup and view all the answers

    What is a potential action a company might take if a competitor's price cut is likely to harm its sales and profits, and the company does not want to reduce its own price?

    <p>Launch a low-price fighter brand—adding a lower-price item to the line or creating a separate lower-price brand</p> Signup and view all the answers

    What could be a potential consequence for a company if it does not consider the reactions of its competitors to its price change?

    <p>Its competitors may interpret the price change negatively, affecting the company's sales and profits</p> Signup and view all the answers

    What is optional-product pricing?

    <p>Setting a price for optional or accessory products with a main product</p> Signup and view all the answers

    When is captive-product pricing used?

    <p>When a price for products must be used with a main product</p> Signup and view all the answers

    What does by-product pricing involve?

    <p>Setting a price for by-products to make the main product more competitive</p> Signup and view all the answers

    What does product bundle pricing involve?

    <p>Combining products and offering them at a reduced price</p> Signup and view all the answers

    When is dynamic pricing used?

    <p>Adjusting prices continually to meet individual customer needs</p> Signup and view all the answers

    What are the reasons for price increases according to the text?

    <p>Cost inflation and over-demand, with a need to avoid perception as price gouging</p> Signup and view all the answers

    What is target costing?

    <p>A technique used by firms to start with an ideal selling price and target costs to meet the price</p> Signup and view all the answers

    What is market-penetration pricing?

    <p>Setting a low price for a new product to attract a large market share</p> Signup and view all the answers

    What does price elasticity measure?

    <p>The sensitivity of demand to changes in price</p> Signup and view all the answers

    When does market-skimming pricing work effectively?

    <p>When product quality and image support the higher price, and competitors cannot easily undercut the high price</p> Signup and view all the answers

    What is the impact of economic conditions on pricing strategies?

    <p>Economic conditions like boom or recession, inflation, and interest rates impact pricing strategies</p> Signup and view all the answers

    Who sets prices in large companies?

    <p>Divisional or product managers</p> Signup and view all the answers

    What is customer value based pricing?

    <p>Based on buyers’ perceptions of value rather than on the seller’s cost</p> Signup and view all the answers

    Study Notes

    Pricing Strategies and Considerations

    • Target costing is a technique used by firms to support price-positioning strategies, starting with an ideal selling price and targeting costs to meet the price.
    • Some companies emphasize nonprice positions by using other marketing mix tools, rather than focusing on price.
    • Luxury smartphone maker, Vertu, places high value in its products and charges premium prices to match that value.
    • Management decisions on who should set prices vary by company size and type. Small companies often have top management setting prices, while large companies rely on divisional or product managers. Industries with price as a key factor may have pricing departments reporting to top management or the marketing department.
    • Price elasticity measures the sensitivity of demand to changes in price, with inelastic demand showing minimal change and elastic demand showing significant change.
    • Economic conditions such as boom or recession, inflation, and interest rates impact pricing strategies. Post-recession consumer frugality has led to responses like price cuts, offering discounts, developing more affordable items, and redefining value propositions.
    • External factors like resellers, government, and social concerns must be considered when setting prices to understand their impact on other parties and broader societal considerations.
    • New product pricing strategies include market-skimming pricing, where a high price is set to maximize revenues, and market-penetration pricing, where a low price is set to attract a large market share.
    • Market-skimming pricing works under certain conditions, such as product quality and image supporting the higher price, and the inability of competitors to easily undercut the high price.
    • Market-penetration pricing aims to attract a large number of buyers and a large market share by setting a low price for a new product, resulting in falling costs and potential for further price cuts.
    • Several conditions must be met for the market-penetration pricing strategy to work effectively.
    • Pricing decisions are influenced by a variety of factors, including the firm's size, type, industry, economic conditions, and external environmental factors.

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    Ch09 PDF - Pricing Strategies

    Description

    Test your knowledge of pricing strategies and considerations with this quiz. Explore topics such as target costing, nonprice positioning, price elasticity, economic conditions, new product pricing strategies, and factors influencing pricing decisions. Brush up on key concepts and factors that impact pricing strategies in various business environments.

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