Principles of Marketing - Pricing Strategies

These flashcards cover key concepts related to pricing strategies in marketing, including definitions and examples of different pricing methods.

Price

The amount of money charged for a product or service, or the sum of the values that consumers exchange for the benefits of having or using the product or service.

Inelastic Demand

Demand that hardly changes with a small change in price.

Elastic Demand

Demand that changes greatly with a small change in price.

Break-Even Analysis

A calculation to determine the sales volume at which total revenues equal total costs.

Value-Based Pricing

Setting price based on perceived value to the customer rather than on the cost of the product.

Demand-Based Pricing

A pricing strategy that considers customer demand and elasticity, often resulting in multiple prices for different segments.

Cost-Based Pricing

A pricing strategy that calculates the price based on the cost of production plus a markup.

Competition-Based Pricing

Setting prices based on what competitors are charging.

Penetration Pricing

A strategy of setting a low price to gain market share quickly before increasing it.

Price Skimming

Setting a high price initially and then lowering it over time.

Pricing Objectives

Goals set in relation to the price of a product, often focusing on aspects such as profit, volume, and competition.

Psychological Pricing

Pricing strategies that consider the psychological impact on consumers, such as pricing something at $34.99 instead of $35.00.

Premium Pricing

Setting a high price for a product to indicate quality.

Optional Product Pricing

Pricing strategy for optional extras to a product, often seen in automobile sales.

Product-Bundle Pricing

Combining several products at a single price, often used in software or media sales.

Geographical Pricing

Setting different prices for customers based on geographical location.

Pricing and Profitability

The relationship between pricing strategies and the overall profitability of a product or service.

Factors Affecting Pricing Decisions

Internal and external factors that must be considered when establishing product pricing, such as costs, competition, and market demand.

Organizational Considerations

Decisions within a company regarding who is responsible for setting prices.

Total Costs

The sum of fixed and variable costs for a certain level of production.

Variable Costs

Costs that vary directly with the level of production.

Fixed Costs (Overhead)

Costs that do not change with the level of sales or production.