Product Positioning and Pricing Strategies

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Questions and Answers

What is the primary goal of a firm's branding strategy in terms of pricing?

To convey the price-quality tiers of their products or services to consumers.

What are the benefits of having a range of price points for a firm?

To cover more of the market and give consumers more choices.

What is the first step in the process of setting a pricing policy?

Selecting the pricing objective.

What are the five major objectives of pricing?

Survival, maximum current profit, maximum market share, maximum market skimming, and product-quality leadership. Signup and view all the answers

What is the key to improving pricing performance in B-to-B settings?

Spreading pricing authority horizontally across sales, marketing, and finance units and striking a balance between centralizing and delegating that authority. Signup and view all the answers

How do consumers adapt to changing economic conditions?

By shifting their spending and making trade-offs between different products or services. Signup and view all the answers

What is a common mistake companies make when setting prices?

Not revising prices often enough to capitalize on market changes. Signup and view all the answers

What is the purpose of product differentiation?

To create a unique identity for a product or service in the market. Signup and view all the answers

Why is it important to understand consumer pricing psychology when designing pricing strategies?

Because consumers actively process price information and interpret it based on various factors. Signup and view all the answers

What is the goal of premium pricing?

To create a high-quality image and maximize profit margins. Signup and view all the answers

What is one way to differentiate products and create perceived value?

Varying prices for different product items, market segments, distribution channels, and purchase occasions. Signup and view all the answers

How do firms analyze the market in the pricing process?

By determining demand, estimating costs, and analyzing competitors' costs, prices, and offers. Signup and view all the answers

What is a key element of market-positioning strategy that is often overlooked?

Price. Signup and view all the answers

Why is it important to consider consumer perceptions of price when setting prices?

Because purchase decisions are based on how consumers perceive prices and what they consider the current actual price to be. Signup and view all the answers

What is a common mistake companies make when setting prices, and how can it be avoided?

Setting prices independently of the rest of the marketing program, and integrating pricing into the overall market-positioning strategy. Signup and view all the answers

What is required for effectively designing and implementing pricing strategies?

A thorough understanding of consumer pricing psychology and a systematic approach to setting, adapting, and changing prices. Signup and view all the answers

What is a potential drawback of targeting only price-sensitive consumers when developing a pricing strategy?

Leaving money on the table. Signup and view all the answers

What is one method companies use to estimate their demand curves?

Varying the prices of different products in a store or of the same product in similar territories. Signup and view all the answers

Why might online price testing need to be done carefully?

To avoid alienating customers or violating the Sherman Antitrust Act. Signup and view all the answers

What is a limitation of using consumer surveys to estimate demand curves?

Consumers may understate their purchase intentions at higher prices or exaggerate their willingness to pay. Signup and view all the answers

How can a company use data analysis to optimize pricing?

By analyzing data on past prices, quantities sold, and other factors to reveal their relationships. Signup and view all the answers

What is an example of a 'good-better-best' pricing strategy?

A retailer selling power drills at $90, $120, and $130, respectively. Signup and view all the answers

What is the goal of premium pricing?

To create a perception of high value and justify a higher price. Signup and view all the answers

How can companies use market segmentation to inform their pricing strategies?

By identifying and targeting specific segments of the market with tailored pricing strategies. Signup and view all the answers

Study Notes

Positioning Products on Quality and Price

Companies decide where to position their product on quality and price, with most markets having 3-5 price points or tiers.
Marriott Hotels is an example of a company with multiple brands for different price points, ranging from highest (Marriott Vacation Club) to lowest (Fairfield Inn).

Factors in Setting Pricing Policy

A firm considers many factors when setting its pricing policy, including 6 steps: selecting the pricing objective, determining demand, estimating costs, analyzing competitors, selecting a pricing method, and selecting the final price.

Pricing Objectives

Five major pricing objectives: survival, maximum current profit, maximum market share, maximum market skimming, and product-quality leadership.

Demand Curves

Companies attempt to measure demand curves using different methods, including asking consumers how many units they would buy at different proposed prices.
Methods for estimating demand curves include varying prices of different products, online testing, and analyzing data on past prices and quantities sold.

Pricing Strategies

Companies must consider consumer pricing psychology and have a systematic approach to setting, adapting, and changing prices.
Common mistakes in pricing include not revising prices often enough, setting prices independently of the marketing program, and not varying prices enough for different products and market segments.

Consumer Pricing Psychology

Consumers actively process price information, considering prior purchasing experience, formal and informal communications, and point-of-purchase resources.
Purchase decisions are based on how consumers perceive prices and what they consider the current actual price to be.

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Description

Learn how companies determine their product's position on quality and price, and the factors that influence pricing policy decisions. Explore real-world examples and the 6 steps involved in setting pricing objectives.