MKTG 350 1st Edition Lecture 16 Strategic pricing methodsPricing strategies - Cost based- based on the cost of the product – selling price is the basis (final sales price)o (Sales price- cost)/selling price 100-25/75- Competitor based – focused on what the competition is doing and price accordingly o Competitive parity – equal to competitors price o Premium pricing- putting a high price to convey perception of high quality - Value- based – thinking about the customer – what the customers value and how they would set the priceo Improvement value method – Benefit weight- how important a benefit is to the customer o The cost of ownership method- might be willing to pay more for a product upfront if you can reduce the cost associated with owning the product over life time (5 star appliance- more expensive but the electricity decrease is significant)- Everyday low pricingo Keep prices low all the time o Saves search costs of finding lowest over all priceo Associated with lower end stores - High/low pricing o Provides thrill of the chase for the lowest priceo Are customers willing to buy at full price o People buying on sale don’t buy everything on sale - Odd Priceso May be so traditional that sellers are afraid to round them ofo They may suggest a good dealo They have also suggest low quality Reference prices- a comparison price that we use when we evaluate prices to make mental judgments - Internal reference- the price that we have in memory—price that we expect to pay - External reference price- price that is provided by the retailor – help you think that you are getting a deal – sale price right next to real price - MRSPReservation price- the highest price you are willing to play Expectation of future prices- if you think prices will go up or down you will purchase accordinglyThe price quality relationshipThese notes represent a detailed interpretation of the professor’s lecture. GradeBuddy is best used as a supplement to your own notes, not as a substitute.- Most inexperienced consumers use price as an indicator of quality - Price before crucial when consumers have little knowledge about certain products/brands- Heuristics- mental shortcuts (store Nordstrom has good products – K-mart has bad products, also works with brands, country of origin- German engineeringPrice lining- set prices for lines of products New product pricing - Market penetration pricing- set prices low so you can penetrate the market quickly – more people can aford it- fast big market share - Price skimming – introduce product at a high price- customers aren’t price sensitive (iPhones)—when sales decrease drop price a
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