Marketing Final: Price

Price

Amount of something that a buyer exchanges with a seller for a product

Profit Skimming/Maximization

Setting a relatively high price for a period after the product launches

Penetration Pricing/Volume Maximization

Designed to maximize volume and revenue for a firm and to encourage more volume of purchases

Survival Pricing

Lowering prices to the point that revenue just covers costs

Price Sensitivity

The degree to which the price of a product affects consumer purchasing power

Price Elasticity of Demand

Price sensitivity measure that gives the % change in quantity demanded in response to % change in price

Prestige Demand

Demand increases as prices rise and vice versa

Reference Prices

Prices that consumers consider reasonable and fair for a product

Underpricing

Charging customers less than they are willing to pay

Price Gouge

To overcharge a customer in times of need, often when no other options exist

Unbundling

Separating out the individual parts that make up a product and pricing each one individually

Escalator Clause

Ensures that providers of goods and services do not encounter unreasonable financial harship (raising prices, lowering wages, etc.)

Markup Pricing/Cost-Plus Pricing

Pricing method where a certain amount is added to cost of product to set final price

Odd Pricing

Pricing tactic where a firm prices products a few cents below next dollar amount (3.99)

Prestige Pricing

Pricing a product higher than competitors to signal higher quality

Pricing Bundling

Strategy where two or more products are packaged and sold at a single price

Price Discrimination

Charging different customers different prices for the same product

Price Fixing

When two or more companies collude to set a product’s price

Predatory Pricing

The practice of first setting prices low with intention of pushing competitors out of market, then raising prices to normal levels (extreme penetration pricing)

Deceptive Pricing

Intentionally misleading customers with price promotions

Gray Market

Branded products sold through legal but unauthorized distribution channels

Dumping

When a company sells its exports to another country at a lower price than domestically

Dynamic Pricing

Allows for the adjustment of the pricing of products based on factors like supply/demand, competitive pricing, and external conditions

Product Mix Pricing (3)

1) Bundling

2) Optional-Product Pricing

3) Captive-Product Pricing

Optional-Product Pricing

Offer base product at lower price, then charge for addons

Captive-Product Pricing

Price base product low and profit on required consumable

Product Line Pricing

Setting distinct price steps between items in a product line (good, better, best)

Psychological Pricing

Every tier ends in .99, makes each tier feel lower than the next dollar amount

Goldilocks Pricing

Similar to tiered pricing option, but giving a middle option to make another (more expensive) option look better