Principles of Marketing - Pricing Strategies

Flashcards covering key concepts from marketing principles related to pricing strategies, customer value perceptions, costs, competition, and external factors affecting pricing decisions.

What is the definition of price in marketing?

Price is the amount of money charged for a product or service, or the sum of all the values that customers exchange for the benefits of having or using the product or service.

What are the three major pricing strategies?

Customer value-based pricing, cost-based pricing, and competition-based pricing.

What is value-based pricing?

Value-based pricing uses the buyers’ perceptions of value rather than the seller’s cost.

What is good-value pricing?

Good-value pricing is offering just the right combination of quality and good service at a fair price.

What is everyday low pricing (EDLP)?

Everyday low pricing involves charging a constant everyday low price with few or no temporary price discounts.

What is high-low pricing?

High-low pricing involves charging higher prices on an everyday basis but running frequent promotions to temporarily lower prices on selected items.

What is value-added pricing?

Value-added pricing attaches value-added features and services to differentiate the company's offers and thus their higher prices.

What do fixed costs refer to in pricing?

Fixed costs are the costs that do not vary with production or sales level, such as rent, heat, and executive salaries.

What is cost-plus pricing?

Cost-plus pricing adds a standard markup to the cost of the product.

What is break-even pricing?

Break-even pricing (target return pricing) is setting a price to break even on costs or to make a target return.

What factors influence pricing decisions?

External factors such as the market demand, competitor's pricing strategies, and internal factors such as the company's marketing strategy, objectives, and costs.

What is the price elasticity of demand?

Price elasticity is a measure of the sensitivity of demand to changes in price.

What is the significance of understanding customer perceptions in pricing?

Understanding customer perceptions is crucial because if customers perceive that a product's price is greater than its value, they won't buy it.

What is target costing?

Target costing starts with an ideal selling price based on consumer value considerations and then targets costs that will ensure that the price is met.

What is competition-based pricing?

Competition-based pricing is setting prices based on competitors’ strategies, costs, prices, and market offerings.

What are the two types of costs in cost-based pricing?

Fixed costs and variable costs.

What is the relationship between demand and price?

Demand and price are inversely related; higher prices typically lead to lower demand.

What does the market demand curve illustrate?

The demand curve shows the number of units the market will buy in a given period at different prices.

What are threats associated with direct marketing?

Threats include irritation, unfairness, deception, fraud, and consumer privacy concerns.