MKT Final - Chapter 14

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MKT Final - Chapter 14

Arriving At The Final Price

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Step Four in the Pricing Process
Select and Approximate Price Level
Skimming Pricing
- setting the highest initial price that customers really desiring the product are willing to pay
- customers are not price sensitive
Penetration Pricing
- setting a low initial price on a new product immediately to the mass market
- people are price sensitive, low price discourages competitors, costs fall due to volume sold
Prestige Pricing
- setting a high price so that quality or status conscious consumers will be attracted to the product and buy it
Price Lining
- firm that is selling not just a single product but a line of products may price them at a number of different specific pricing points (Nike shoe example - different levels)
Odd-even Pricing
- setting prices a few dollars or cents under an even number (19.99)
Target Pricing
- results in the manufacturer deliberately adjusting the composition and features of a product to achieve the target price to consumers
Bundle Pricing
- marketing 2 or more products in a single package price
- (XBox comes with game and two controllers and bad game)
Yield Management Pricing
- the charging of different prices to maximize revenue for a set amount of capacity at any given time
Standard Markup Pricing
-entails adding a fixed percentage to the cost of all items in a specific product class
Cost-Plus Pricing
- involves summing the total unit cost of providing a product or service and adding a specific amount to the cost to arrive at a price
Experience Curve Pricing
- based on the learning effect, which holds that the unit cost of many products and services declines by 10% to 30% each time a firm experience at producing and selling them doubles
Loss Leader Pricing
- not to increase sales, but to attract customers in hopes they will buy other products as well
Step Five in the Pricing Process
Set the List or Quoted Price:
- Fixed vs. Flexible Price Policy
- Choosing a Price Policy
One-price Policy
- (a.k.a. fixed pricing) setting one price for all buyers of a product or service
Flexible Pricing Policy
- (a.k.a. dynamic pricing) setting different price for products and services depending on individual buyers and purchase situations
Product Line Pricing
- setting the prices for all items in a product line
- determines: 
    (1) lowest priced product and price
    (2) highest priced product and price
    (3) price differentials for all other products in the line
Price War
- involves successive price cutting by competitors to increase or maintain their unit sales or market share
Step Six in the Pricing Process
Make Special Adjustments to the list or quoted price
- discounts, allowances
- reductions from the list price that a seller gives a buyer as reward for some activity of the buyer that is favorable to the seller
(quantity, seasonal, cash)
Quantity Discounts
- when a customer buys more they get a discount for buying large amounts
Seasonal Discounts
- encourages buyers to stock inventory earlier than their normal demand would require
Cash Discounts
- if you pay with cash and quickly, a discount will be received
- reductions from list or quoted prices to buyers for performing some activities
(trade-in, promotional, everyday low prices)
Trade-in Allowances
- price reduction given when a used product is part of the payment of new product
Promotional Allowances
- undertaking certain advertising or selling activities to promote a product
Everyday Low Pricing
- practice of replacing promotional allowances with lower manufacturer list price