37 Cards in this Set
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Cost-based Methods
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- Pricing starts with cost
- All costs calculated on a per unit basis
- Assumes costs don't vary for different levels of production
- 25% standard mark-up
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Target Costing Strategy
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Determine the target retail price
- Work backward to determine wholesale, etc.
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Competition-Based Methods
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Set prices to signal information of how product compares with competitors
- Premium pricing
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Value-Based Methods
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Setting prices that focus on the overall value of the product
- Consumer perceptions
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Two Pricing Strategies
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1. Everyday low pricing (EDLOP)
2. High/Low Pricing
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Price Discrimination
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Charging a different price to different people for the same product
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What is the goal of Price Discrimination?
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The goal of marketers is to get people to pay whatever they are willing to pay.
Ex. Coupons, Senior Citizen's Discount, Limited time only sales, Loyalty Discounts, etc.
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Why would people be willing to pay different prices for the same product?
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Different market segments are at different points on the demand curve with different elasticities.
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Everyday Low Pricing
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Saves search costs of find lowest overall prices
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High/Low Pricing
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Provides the thrill of the chase of the lowest price
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Odd prices
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- May be so traditional that sellers are afraid to round them off
- Suggest a good deal
- May also suggest low quality
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Price-Quality Relationship
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- Most inexperienced consumers use price as an indicator of quality
- Price becomes crucial when consumers have little knowledge about certain products/brands
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Price Lining
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Marketers establish a price floor and price ceiling and set prices in between
- Allows for easy comparison
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New Product Pricing Strategies
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- Market Penetration Pricing
- Price skimming
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Pricing Tactics Aimed at Consumers
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- Markdowns
- Quantity discounts
- Seasonal discounts
- Coupons
- Rebates
- Leasing
- Price bundling
- Leader pricing
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Markdowns
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- An integral component of high/low pricing strategy
- Enables retailers to get rid of slow moving or obsolete merchandise
- Used to generate store traffic
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Quantity Discounts
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- Size discount
- The more you buy the cheaper the unit cost
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Seasonal Discounts
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Encourage consumers to use services or purchase products year round
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Coupons vs Rebates
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- Manufacturer issues
- Allows retailer to offer a product at different prices
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Coupons
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Retailer handles
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Price Bundling
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Strategy in which related products are sold as a single unit
- Encourages sales of flow moving items
- Encourage stock up
- Encourage trial of new brand
- Incentive to purcahse
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Pure Price Bundles
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Products sold only in bundle with related products
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Mixed Price Bundling
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Products sold both individually and in bundles with related products
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Leader Pricing
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Enticing consumers into the store with popular aggressively price items and hoping they will pick up other items while shopping
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Captive Pricing
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Once customer makes an initial purchase or decision, they are constrained to purchase future items only from the same vendor
Ex. Purchase popcorn at the movies
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Seasonal Discounts
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Designed to spur buyers into purchasing merchandise early
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Cash Discounts
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- Reduced invoice cost if buyer pays prior to the end of the discount period
- Encourages buyers to pay before the discount period ends
- Seller benefits either way
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Allowances
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- Lowers the final cost in return for specific behavior
- Advertising allowance
- Slotting allowance
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Deceptive or Illegal Price Advertising
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- Deceptive reference price
- Loss leader pricing
- Bait and switch
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Predatory Pricing
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Prices set low with intent to drive competitor out of business
- Illegal
- Difficult to prove
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Price Discrimination
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Not always illegal
- Different rules in the B2B and B2C markets
- Federal law does not apply to sales to end consumers
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Cumulative Quantity Discount
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Uses the amount purchased over a specified time period and usually involves several transactions
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Horizontal Price Fixing
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Occurs when competitors that produce and sell competing products work together to control prices, effectively taking price out of the decision process for consumers
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Price skimming
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Involves consumers being willing to pay a higher price to obtain the new product or service
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Uniform delivered pricing
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Shipper charges one rate, no matter where the buyer is located
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Vertical price fixing
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Occurs when parties at different levels of the same marketing channel collude to control the prices passed on to consumers
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Size Discount
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The more you buy, the cheaper the cost
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MKT 300: Exam 2