ASU MKT 300 Eaton Exam 4 Questions with Answers
Internal/External Factors of Price - -Internal Factors of Price:
1. Marketing Objective
2. Marketing Mix Strategy
3. Cost
External Factors of Price:
1. Demand for your product.
2. Competition
3. Economy
-Price Elasticity - -Elastic - Consumers buy more or less of a product when the price
changes
Inelastic- An increase or decrease in price will not significantly affect demand
-What happens to price/revenue when the demand is elastic/inelastic - -Demand is... Price
goes... Revenue goes...
Elastic: ------Up ---------- Down
Elastic: ------Down ------- Up
Inelastic: ----Up ---------- Up
Inelastic: ----Down ------- Down
-Stages for Establishing Prices - -1. Develop pricing objectives
2. Assess target market's evaluation of price
3. Evaluate competitors' prices
4. Select a basis for pricing
5. Select a pricing strategy
6. Determine a specific price
-Stages for Establishing Prices (Step 1 and 4) - -Develop Pricing Objectives
-Profit
-Status Quo: Identify price levels similar to competitor average price
-Market Share
Selecting a Basis for Pricing
-Cost: adding a specified dollar amount to the seller's costs (Markup and Margin)
-Demand: Customers pay a higher price when demand for the product is strong and a lower
price when demand is weak (same as flexible pricing)
-Competition
o competing products are homogeneous resulting in elastic demand
o organization is serving markets in which price is a key consideration
-New Product (Skimming and Penetration)
, -Flexible/variable pricing - --Off-peak cheaper prices
-Different segments pay different rates
-New Product Pricing Strategies - -Market Skimming: charging the highest possible price
that buyers who desire the product will pay
- Premium
- Overcharging
Market Penetration: Setting prices below those of competing brands to penetrate a market
and gain a significant market share quickly
- Good-value
- Economic
-Market Pricing - -1. Selling Price = $1,800, Cost = $600. What is markup %?
2. Cost = $100, markup % = 75%. What is selling price?
3. Selling Price = $300, markup % = 33.3%. What is cost?
1. 66.7% (cost is 1/3, so markup% must be 2/3)
2. $400 (3/4 of the selling price is markup, ¼ is cost)
3. $200 (cost must be 2/3 of $300 selling price)
-Break-Even Pricing - -Total Fixed Costs / (Selling price - Variable cost)
-Everyday Low Prices - -Settling a low price for products on a consistent basis
-Reference pricing (Selling against the Brand) - -Pricing a product at a moderate level and
positioning it next to a more expensive model or brand
Retailers sometimes add higher-priced items to extend the range of product price
alternatives
-Portfolio Pricing - -Different levels of price points across a product category where
consumers are willing to pay more for extras
-Price bundling - -Packaging together two or more complementary products and selling
them for a single price
-Captive-product pricing - -Captive products are items designed specifically for use with
another product (many are necessary for the core product to function properly)
-Multiple-unit pricing - -Packaging together two or more identical products and selling
them for a single price
-Single-price - -all customers are charged the same price for all the goods and services
offered for sale within that product category
Internal/External Factors of Price - -Internal Factors of Price:
1. Marketing Objective
2. Marketing Mix Strategy
3. Cost
External Factors of Price:
1. Demand for your product.
2. Competition
3. Economy
-Price Elasticity - -Elastic - Consumers buy more or less of a product when the price
changes
Inelastic- An increase or decrease in price will not significantly affect demand
-What happens to price/revenue when the demand is elastic/inelastic - -Demand is... Price
goes... Revenue goes...
Elastic: ------Up ---------- Down
Elastic: ------Down ------- Up
Inelastic: ----Up ---------- Up
Inelastic: ----Down ------- Down
-Stages for Establishing Prices - -1. Develop pricing objectives
2. Assess target market's evaluation of price
3. Evaluate competitors' prices
4. Select a basis for pricing
5. Select a pricing strategy
6. Determine a specific price
-Stages for Establishing Prices (Step 1 and 4) - -Develop Pricing Objectives
-Profit
-Status Quo: Identify price levels similar to competitor average price
-Market Share
Selecting a Basis for Pricing
-Cost: adding a specified dollar amount to the seller's costs (Markup and Margin)
-Demand: Customers pay a higher price when demand for the product is strong and a lower
price when demand is weak (same as flexible pricing)
-Competition
o competing products are homogeneous resulting in elastic demand
o organization is serving markets in which price is a key consideration
-New Product (Skimming and Penetration)
, -Flexible/variable pricing - --Off-peak cheaper prices
-Different segments pay different rates
-New Product Pricing Strategies - -Market Skimming: charging the highest possible price
that buyers who desire the product will pay
- Premium
- Overcharging
Market Penetration: Setting prices below those of competing brands to penetrate a market
and gain a significant market share quickly
- Good-value
- Economic
-Market Pricing - -1. Selling Price = $1,800, Cost = $600. What is markup %?
2. Cost = $100, markup % = 75%. What is selling price?
3. Selling Price = $300, markup % = 33.3%. What is cost?
1. 66.7% (cost is 1/3, so markup% must be 2/3)
2. $400 (3/4 of the selling price is markup, ¼ is cost)
3. $200 (cost must be 2/3 of $300 selling price)
-Break-Even Pricing - -Total Fixed Costs / (Selling price - Variable cost)
-Everyday Low Prices - -Settling a low price for products on a consistent basis
-Reference pricing (Selling against the Brand) - -Pricing a product at a moderate level and
positioning it next to a more expensive model or brand
Retailers sometimes add higher-priced items to extend the range of product price
alternatives
-Portfolio Pricing - -Different levels of price points across a product category where
consumers are willing to pay more for extras
-Price bundling - -Packaging together two or more complementary products and selling
them for a single price
-Captive-product pricing - -Captive products are items designed specifically for use with
another product (many are necessary for the core product to function properly)
-Multiple-unit pricing - -Packaging together two or more identical products and selling
them for a single price
-Single-price - -all customers are charged the same price for all the goods and services
offered for sale within that product category
