Pricing Strategies Flashcards

Flashcards for reviewing pricing strategies, including new-product, product mix, and price adjustment strategies.

What is market-skimming pricing?

High initial prices to 'skim' revenue layers from the market.

What are some conditions for effective market-skimming pricing?

Product quality and image must support the price, buyers must want the product at the price, and competitors should not be able to easily enter the market.

What is market-penetration pricing?

Setting a low initial price to penetrate the market quickly and deeply.

What conditions favor market-penetration pricing?

Price sensitive market, inverse relationship of production and distribution cost to sales growth and low prices keep competition out.

What is product line pricing?

Pricing strategy that considers cost differences between products in the line, customer evaluation of features, and competitor's prices.

What is optional product pricing?

Pricing strategy that considers optional or accessory products along with the main product.

What is captive-product pricing?

Pricing strategy involving products that must be used along with the main product.

What is two-part pricing?

Breaking the price into a fixed fee and a variable usage fee.

What is by-product pricing?

Products with little or no value produced as a result of the main product.

What is product bundle pricing?

Combines several products at a reduced price.

What is discount and allowance pricing?

Reduces prices to reward customer responses such as paying early or promoting the product.

What is segmented pricing?

When a company sells a product at two or more prices even though the difference is not based on cost.

What conditions are needed to implement segmented pricing effectively?

Market must be segmentable, segments must show different degrees of demand, and extra revenue obtained from the price difference must exceed watching the market

What is psychological pricing?

When sellers consider the psychology of prices and not simply the economics.

What are reference prices?

Are prices that buyers carry in their minds and refer to when looking at a given product

What is promotional pricing?

When prices are temporarily priced below list price or cost to increase demand.

What are the risks of promotional pricing?

Used too frequently, and copies by competitors can create 'deal-prone' customers.

What is geographical pricing?

Used for customers in different parts of the country or the world.

What is FOB (free on board) pricing?

Goods are delivered to the carrier, and the title and responsibility pass to the customer.

What is uniformed delivery pricing?

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

What is zone pricing?

The company sets up two or more zones where customers within a given zone pay a single total price.

What is basing-point pricing?

A seller selects a given city as a 'basing point' and charges all customers the freight cost associated from that city.

What is freight absorption pricing?

The seller absorbs all or part of the actual freight charge as an incentive.

What is dynamic pricing?

Prices are adjusted continually to meet the characteristics and needs of the individual customer and situations.

What is international pricing?

Prices are set in a specific country based on country-specific factors.

What causes price cuts?

Excess capacity and increased market share.

What causes price increases?

Cost inflation, increased demand, and lack of supply.

What is price-fixing?

Sellers must set prices without talking to competitors.

What is predatory pricing?

Selling below cost with the intention of punishing a competitor.

What is the Robinson-Patman Act?

Prevents unfair price discrimination by ensuring that the seller offer the same price terms to customers at a given level of trade.

What is retail (resale) price maintenance?

When a manufacturer requires a dealer to charge a specific retail price for its products.

What is deceptive pricing?

When a seller states prices or price savings that mislead consumers.

What is scanner fraud?

Failure of the seller to enter current or sale prices into the computer system.

What is price confusion?

Results when firms employ pricing methods that make it difficult for consumers to understand what price they are really paying.

What are possible solutions when responding to price changes from competitors?

Reduce price to match competition, maintain price and raise perceived value, improve quality and increase price, or launch a lower-price fighting brand.