MKT 300 Exam 3 Jim Karrh |178 Complete Q’s and A’s
Price competition - -Emphasizing price as an issue and matching or beating competitors'
prices
-Nonprice competition - -emphasizing factors other than price to distinguish a product
from competing brands
-Survival - -If in trouble, a company might temporarily setting prices low, at times below
costs, in order to attract more sales
-Profit - -May be stated in terms of either actual dollar amounts or a percentage of sales
revenues
-Return on Investment - -Related to profit, can be difficult to specify
-Market Share - -A product's sales in relation to total industry sales
-Cash Flow - --Some companies set prices so they can recover cash as quickly as possible
-May be used when there is a short product life cycle
-Status Quo - -Want to maintain a certain market share or position
-But markets are dynamic!
-Product Quality - -Use pricing to build quality and the perception of quality too
-Why may demand change? - --Changes in buyers' needs
-Variations in the effectiveness of other marketing-mix variables
-The presence of substitutes
-Dynamic environment
-Elasticity formula - -
-What to consider when choosing a pricing strategy? - --Costs
-Competition
-Consumer behavior
-Capacity
-Cycle (Product Life Cycle, that is)
-Shrinkflation - -decreasing product quantity/size while maintaining or increasing price
-Complex Pricing - -Complex pricing is making pricing so complex that customers don't
understand how it works means that the company might be taking financial advantage of
customers.
, -Losing Sales over Complex Pricing: Incomprehensibility - -Consumers cannot understand
the logic behind the pricing
-Losing Sales over Complex Pricing: Changing too often - -It is simpler than ever for
companies to change prices - but that can frustrate consumers
-Losing Sales over Complex Pricing: Too much itemized pricing - -Many companies are
moving away from "all-inclusive" or bundled pricing in favor of itemized pricing - each
feature or benefit is priced separately
-Research shows that as the number of itemized prices rises above two, consumers start to
question the pricing
-New Product Pricing - -price skimming, penetration pricing
-Differential Pricing - -negotiated pricing, secondary market pricing, periodic discounting,
random discounting
-Psychological Pricing - -pricing that considers the psychology of prices and not simply the
economics; the price is used to say something about the product
-Product-Line Pricing - -Captive Pricing, premium pricing, and price lining
-Promotional Pricing - -temporarily pricing products below the list price, and sometimes
even below cost, to increase short-run sales
-Markup - -The difference between the wholesale price and retail price
-Price Skimming - -set a relatively high price at first and then lower it over time
-Allows for sunk cost (R&D) recovery
-Good for inelastic demand
-Encourages competition
-Penetration Pricing - -set a relatively low price to drive market share/value perceptions
-Designed for high market share (hence penetration)
-Volume over margin
-Discourages competition
-Good for elastic products
-Psychological pricing - -Strategies that encourage purchases based on consumers'
emotional responses, rather than on economically rational ones
-Odd-Even Pricing - -ending prices in odd or non-round numbers
-Limited processing capacity: $4.99 is stored in memory as $4.00 or maybe $4.90
-The more specific the price, the more consumers believe it's the lowest price possible
Price competition - -Emphasizing price as an issue and matching or beating competitors'
prices
-Nonprice competition - -emphasizing factors other than price to distinguish a product
from competing brands
-Survival - -If in trouble, a company might temporarily setting prices low, at times below
costs, in order to attract more sales
-Profit - -May be stated in terms of either actual dollar amounts or a percentage of sales
revenues
-Return on Investment - -Related to profit, can be difficult to specify
-Market Share - -A product's sales in relation to total industry sales
-Cash Flow - --Some companies set prices so they can recover cash as quickly as possible
-May be used when there is a short product life cycle
-Status Quo - -Want to maintain a certain market share or position
-But markets are dynamic!
-Product Quality - -Use pricing to build quality and the perception of quality too
-Why may demand change? - --Changes in buyers' needs
-Variations in the effectiveness of other marketing-mix variables
-The presence of substitutes
-Dynamic environment
-Elasticity formula - -
-What to consider when choosing a pricing strategy? - --Costs
-Competition
-Consumer behavior
-Capacity
-Cycle (Product Life Cycle, that is)
-Shrinkflation - -decreasing product quantity/size while maintaining or increasing price
-Complex Pricing - -Complex pricing is making pricing so complex that customers don't
understand how it works means that the company might be taking financial advantage of
customers.
, -Losing Sales over Complex Pricing: Incomprehensibility - -Consumers cannot understand
the logic behind the pricing
-Losing Sales over Complex Pricing: Changing too often - -It is simpler than ever for
companies to change prices - but that can frustrate consumers
-Losing Sales over Complex Pricing: Too much itemized pricing - -Many companies are
moving away from "all-inclusive" or bundled pricing in favor of itemized pricing - each
feature or benefit is priced separately
-Research shows that as the number of itemized prices rises above two, consumers start to
question the pricing
-New Product Pricing - -price skimming, penetration pricing
-Differential Pricing - -negotiated pricing, secondary market pricing, periodic discounting,
random discounting
-Psychological Pricing - -pricing that considers the psychology of prices and not simply the
economics; the price is used to say something about the product
-Product-Line Pricing - -Captive Pricing, premium pricing, and price lining
-Promotional Pricing - -temporarily pricing products below the list price, and sometimes
even below cost, to increase short-run sales
-Markup - -The difference between the wholesale price and retail price
-Price Skimming - -set a relatively high price at first and then lower it over time
-Allows for sunk cost (R&D) recovery
-Good for inelastic demand
-Encourages competition
-Penetration Pricing - -set a relatively low price to drive market share/value perceptions
-Designed for high market share (hence penetration)
-Volume over margin
-Discourages competition
-Good for elastic products
-Psychological pricing - -Strategies that encourage purchases based on consumers'
emotional responses, rather than on economically rational ones
-Odd-Even Pricing - -ending prices in odd or non-round numbers
-Limited processing capacity: $4.99 is stored in memory as $4.00 or maybe $4.90
-The more specific the price, the more consumers believe it's the lowest price possible
