PRICING STRATEGY MIDTERM REVIEWER!!

PRICE

the amount of money charged for a product or a service.

PRICE

sum of all the values that customers give

up to gain the benefits of having or using a product or service.

PRICING

a strategically correct value attached to a product/service

corresponding to what it delivers

THE PRICE TO THE SELLER

Price is revenue and profit source

THE PRICE TO THE CONSUMER

Price is the cost of something

PRICE

is that which is given up in an exchange to acquire a good

or service

REVENUE

the price charged to customers multiplied by the number of

units sold.

PROFIT

Revenue minus expenses

Revenue = Unit Price x Number of units sold

Revenue pays for every activity

PROFIT ORIENTED

This type objectives target is to achieve the high profit, having

the below two major technique to reach

TARGET RETURN

It specifies a specific amount or percentage amount that the

price will be offered at in order to make a profit which has

been calculated for a specific purpose.

MAXIMIZE PROFIT

The Competitive Market is not intense may charge the highest

price the market will bear because sometimes and may have an advantage for reasons based on the geographic advantage

Special features not available on other competitors'

products.

SALES ORIENTED

This type objectives target is to achieve the high sales,

having the below two major techniques to reach

MARKET SHARES

A company's product sales as a percentage of total sales

for that industry

SALES MAXIMIZATION

Short-term objective to maximize sales

• Ignores profits, competition, and the marketing

environment

• May be used to sell off excess inventory

STATUS QUO ORIENTED

Status Quo meets most of the competitions in industries

and to get the pricing level of the particular product.

MEET THE COMPETITION

Customer has many choices, and the vendor have

resources to stay in the market, then just charge the same

price. If the vendor does not have the resources to survive

a price war and vendor don't have the ability to claim better

quality.

PRICE

only one element of the company's broader

marketing strategy.

PRICING

may play an important role in helping to

accomplish company objectives at many levels.

TARGET COSTING

is the pricing that starts with an ideal selling price, then

targets costs that will ensure that the price is met.

TOP MANAGEMENT

sets the pricing objectives and policies, and it often approves the prices proposed by lowerlevel

management or salespeople.

INDUSTRIES

In ______, companies often

have pricing departments to set the best prices or help others set them.

•sales managers,

•production managers,

•finance managers, and

•accountants.

OTHER ORGANIZATIONAL CONSIDERATIONS THAT AFFECTS THE PRICING

PURE COMPETITION

consists of many buyers and sellers trading in a uniform commodity, such as wheat, copper, or financial securities.

PURE COMPETITION

No single buyer or seller has much effect on the going market price.

MONOPOLISTIC COMPETITION

consists of many buyers and sellers who trade over a range of prices rather than a single market price.

MONOPOLISTIC COMPETITION

Sellers try to develop differentiated offers for different customer segments and, in addition to price, freely use branding, advertising, and personal selling to set their offers apart.

OLIGOPOLISTIC COMPETITION

Because there are few sellers, each seller is alert and responsive to competitors' pricing strategies and marketing moves

OLIGOPOLISTIC COMPETITION

market consists of only a few large sellers.

PURE MONOPOLY

market is dominated by one seller.

PURE MONOPOLY

The seller may be a government monopoly, a private regulated monopoly, or a private unregulated monopoly.

DEMAND

The quantity of a product that will be sold in the market at

various prices for a specified period.

SUPPLY

The quantity of a product that will be offered to the market by a supplier at various prices for a specific period.

DEMAND CURVE

is a curve that shows the number of units the market will buy in a given time period, at different prices that might be charged.

PRICE ELASTICITY

measure of the sensitivity of demand to changes in

price.

LOWERING THE PRICE

If demand is elastic rather than inelastic, sellers will

consider _____

ECONOMIC

______ conditions can have a strong impact on the firm's pricing strategies.

•Resellers react to various prices

• Government

• Social Concerns

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OTHER EXTERNAL FACTORS THAT AFFECTING THE PRICE DECISIONS

CUSTOMER VALUE-BASED PRICING

pricing uses buyers'

perceptions of value as the key to pricing.

GOOD VALUE PRICING

offering the right combination of quality and

good service at a fair price.

EVERDAY LOW PRICE (EDLP)

involves charging a constant, everyday low price with

few or no temporary price discounts.

HIGH LOW PRICING

involves charging higher prices on an everyday basis but running frequent promotions to lower price temporarily on selected items.

VALUE ADDED

they attach _____ features and services to differentiate their offers

and thus support their higher prices.

COST-BASED PRICING

involves setting prices based on the costs of producing, distributing, and selling the product plus a fair rate of return for its effort and risk.

FIXED COST

cost that do not vary with production or sales level

VARIABLE COST

Costs that vary directly with the level of production.

TOTAL COST

The sum of the fixed and variable costs for any given level of production

MARK-UP PRICING (COST-PLUS PRICING)

the simpleast pricing method. Adding a standard markup to the cost of the product.

SELLERS

_____ are more certain about costs than about demand.

BREAK EVEN PRICING (TARGET RETURN)

sets price to break even on the costs of making and marketing a product, or setting price to make a target return.

BREAK-EVEN CHART

Target return pricing uses the concept of a ______, which shows the total cost and total revenue expected at different sales volume levels.

SPECIAL-EVENT PRICING

LIMITED TIME OFFERS

CASH REBATES

FORMS OF PROMOTIONAL PRICING

CUSTOMER-SEGMENT PRICING

PRODUCT FORM PRICING

LOCATION-BASED PRICING

TIME-BASED PRICING

FORMS OF SEGMENTED PRICING

INTRODUCTION STAGE

GROWTH STAGE

MATURITY STAGE

DECLINE STAGE

STAGES OF PRODUCT LIFE CYCLE

COMPETITION BASED PRICING

involves setting prices based on competitors' strategies, costs, prices, and market offerings.

COMPETITORS

Consumers will base their judgments of a product's value on the prices that _____ charge for similar products.

MARKET SKIMMING PRICING

Setting a high price for a new product to skim maximum revenues layer by layer from the segments willing to pay the high price; the company makes fewer but more profitable sales

MARKET SKIMMING PRICING

Product quality and image must support the price.

MARKET SKIMMING PRICING

Buyers must want the product at the price.

MARKET SKIMMING PRICING

Costs of producing the product in small volume should not cancel the advantage of higher prices.

MARKET SKIMMING PRICING

Competitors should not be able to enter the market easily.

MARKET PENETRATION PRICING

sets a low initial price in order to penetrate the market

quickly and deeply to attract a large number of buyers quickly to gain market share.

MARKET PENETRATION PRICING

Price sensitive market.

MARKET PENETRATION PRICING

Inverse relationship of production and distribution cost to sales growth.

MARKET PENETRATION PRICING

Low prices must keep competition out of the market.

PRODUCT LINE PRICING

Companies usually develop product lines rather than single products.

OPTIONAL PRODUCT PRICING

takes into account optional or accessory along with the main product.

CAPTIVE PRODUCT PRICING

Involves products that must be used along with the main product.

TWO-PART PRICING

involves breaking the price ratio:

- fixed fee

- variable usage fee

BY-PRODUCT PRICING

refers to products with little or no value produced as a result of the main product.

PRODUCERS

(UNDER BY-PRODUCT PRICING) _____will seek

little or no profit other than the cost to cover storage and salary.

PRODUCT BUNDLE PRICING

sellers often combine several products and offer the bundle at a reduced price.

PRICE ADJUSTMENT STRATEGIES

refers to all those strategies which are applied by an

organisation to take into consideration the difference among the customers and rapidly changing environment.

DISCOUNT AND ALLOWANCE PRICING

Most companies adjust their basic price to reward

customers for certain responses

CASH DISCOUNT

a price reduction to buyers who pay their bills promptly.

QUANTITY DISCOUNT

a price reduction to buyers who buy large volumes.

FUNCTIONAL DISCOUNT (Trade Discount)

to trade-channel members who perform certain functions, such as selling, storing, and record keeping.

SEASONAL DISCOUNT

a price reduction to buyers who buy merchandise or services out of season.

ALLOWANCE

are another type of reduction from the list price

TRADE-IN ALLOWANCES

are price reductions given for turning in an old item when buying a new one.

PROMOTIONAL ALLOWANCES

are payments or price reductions that reward dealers for participating in advertising and salessupport programs.

CASH DISCOUNT

QUANTITY DISCOUNTS

FUNCTIONAL DISCOUNT (TRADE DISCOUNT)

SEASONAL DISCOUNT

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TYPES OF DISCOUNT PRICING

TRADE-IN ALLOWANCES

PROMOTIONAL ALLOWANCES

FORM OF ALLOWANCES PRICING

SEGMENTED PRICING

Selling a product or service at two or more prices, where the difference in prices is not based on differences in costs.

CUSTOMER-SEGMENT PRICING

different customers pay different prices for the same product

or service.

PRODUCT FORM PRICING

different versions of the product are priced differently but not

according to differences in their costs

LOCATION-BASED PRICING

a company charges different prices for different locations, even though the cost of offering each location is the same.

TIME-BASED PRICING

a firm varies its price by the season, the month, the day, and even the hour.

PSYCHOLOGICAL PRICING

Pricing that considers the psychology of prices and not simply the economics; the price is used to say something about the

product.

REFERENCE PRICES

might be formed by noting current prices,

remembering past prices, or assessing the buying situation.

PROMOTIONAL PRICING

companies will temporarily price

their products below list price—and sometimes even below cost to create buying excitement and urgency.

SPECIAL-EVENT PRICING

in certain seasons to draw more customers.

LIMITED TIME OFFERS

create buying urgency and make buyers feel lucky to have gotten in on the deal.

CASH REBATES

consumers who buy the product from dealers within a specified time;

GEOGRAPHICAL PRICING

Is used for customers in different parts of the country or the world

FoB ORIGIN PRICING

this practice means that the goods are placed free on board

(hence, FOB) a carrier. At that point, the title and responsibility pass to the customer, who pays the freight from the factory to the destination.

UNIFORM-DELIVERED PRICING

Here, the company charges the same price plus freight to all customers, regardless of their location.

ZONE PRICING

falls between FOB-origin pricing and uniform-delivered

pricing. The company sets up two or more zones. All customers within a given zone pay a single total price; the more distant the zone, the higher the price.

BASING-POING PRICING

the seller selects a given city as a "basing point" and charges all customers the freight cost from that city to the customer location, regardless of the city from which the goods are actually shipped

DYNAMIC AND ONLINE PRICING

when prices are adjusted continually to meet the

characteristics and needs of the individual customer and situations.

DYNAMIC PRICING

it adjusts prices according to market forces and

consumer preferences.