MODULE 10

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Created by
Richard Henry

Cards (30)

  • Price - It is the exchange of something of value between a buyer and a seller.
  • The price determines how much revenue the company will earn and drives the financial health of the organization.
  • The elements of pricing:
    1. Price as an indicator of value
    2. Price in the marketing mix
    3. The Profit Equation
  • PROFIT is the financial gain of a company, or the difference between the amount earned and the amount spent in buying, operating, or producing something.
  • PRICE ANCHORING - price anchoring relies on the first piece of information that a buyer sees. This acts as an anchor, or a frame of reference for what the buyer expects a price to be.
  • ARTIFICIAL TIME CONSTRAINTS - trigger a sense of urgency in the buyer; if they don’t buy today, they’ll miss out on a great deal.
  • PRICE APPERANCE - refers to how the way prices are presented and formatted can influence a buyer's perception of value.
  • PRICE GOUGING - is when companies or individuals take advantage of a
    situation, typically an emergency or natural disaster, and charge exceptionally high prices for products or services.
  • 5 Critical C's of Pricing
    1. Cost
    2. Customers
    3. Channels
    4. Competition
    5. Compatability
  • The Five Step Procedure for Establishing Pricing Policy
    1. Determine Pricing Objectives
    2. Estimate Demand
    3. Estimate Costs
    4. Analyze the External Environment
    5. Set Pricing Strategies or Tactics
  • Demand is an economic term that refers to the buyer’s desire and willingness to purchase a product or service at various prices.
  • Prestige pricing is a strategy that marketers use to set high prices knowing that demand will increase with higher prices because the higher price increases the perceived value of the product.
  • The Demand Elasticity - is a measure of the change in the quantity demanded in relation to the change in its price. Mathematically, it is
    derived from the percent change in quantity demanded divided by the percent change in price.
  • 4 Factors in Demand Elasticity
    1. Availability of Substitutes
    2. Income
    3. Time
    4. Cross-Elasticity of Demand
  • Availability of Substitute - The extent to which consumers can replace one product with another.
  • Income - Measures how sensitive the quantity demanded is to changes in income.
  • Time - The factor reflecting the ability of consumers to adjust their behavior over time.
  • Cross-Elasticity of Demand - Measures how sensitive the quantity
    demanded of one good is to changes in the price of another good.
  • Estimate Cost - Determining a pricing policy is to estimate the total cost
    of producing a product or service. Recall that maximizing profits is the goal of a pricing strategy and marketers must factor the cost of doing business into pricing considerations.
  • Analyze the External Environment - The external environment is comprised of factors outside of the organization that impact marketing decisions. Use of PESTLE Analysis.
  • PRICE SKIMMING - is a new-product strategy in which marketers choose to initially set a high price for a product or service and lower it over time.
  • PENETRATION PRICING - one in which the new product or service is set at the lowest price possible.
  • BREAK-EVEN PRICING- a company sets its product price to cover all its costs but not make a profit or incur a loss. It aims to reach a point where total revenue equals total costs.
  • Pricing Strategies for New Products
    1. Price Skimming
    2. Penetration Pricing
    3. Break-Even Pricing
  • PRODUCT LINE PRICING - company sets different prices for similar products within a line, offering options for various customer preferences and budgets.
  • CAPTIVE PRODUCT PRICING - company sells one main product at a low price and then offers related products or services at higher prices to make additional profit from the same customers.
  • BUNDLE PRICING - marketers use to promote purchasing multiple products at once.
  • PSYCHOLOGICAL PRICING - specifically odd-even pricing, is a strategy where prices end in either odd numbers or even numbers to influence how customers perceive the value of a product.
  • ECONOMY PRICING - companies sell things at a lower price to attract customers who want affordable options. he focus on these products is selling in high volume by lowering prices and minimizing advertising costs.
  • 5 Pricing Strategies for Existing Products
    1. Product Line Pricing
    2. Captive Product Pricing
    3. Bundle Pricing
    4. Psychological Pricing
    5. Economy Pricing