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Pricing Strategies and Concepts
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Pricing Strategies and Concepts
Pricing Strategies and Concepts
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1
Question
What is price?
Answer
Price is the amount of money charged for a product or service. It is the sum of all the values that consumers give up in order to gain the benefits of having or using a product or service.
2
Question
What is unique about price in the marketing mix?
Answer
Price is the only element in the marketing mix that produces revenue; all other elements represent costs.
3
Question
What is effective customer-oriented pricing?
Answer
Effective customer-oriented pricing involves understanding how much value consumers place on the benefits they receive from the product and setting a price that captures that value.
4
Question
How does pricing affect a product's image in consumers' eyes?
Answer
The pricing of a product affects the image of the product in consumers' eyes; high prices are often perceived to indicate high quality.
5
Question
What are the three major pricing strategies?
Answer
1. Customer value-based pricing 2. Cost-based pricing 3. Competitive-based pricing.
6
Question
What is value-based pricing?
Answer
Value-based pricing uses the buyers' perceptions of value, not the sellers' cost, as the key to pricing. Price is considered before the marketing program is set.
7
Question
What is good-value pricing?
Answer
Good-value pricing offers the right combination of quality and good service at a fair price.
8
Question
What is everyday low pricing (EDLP)?
Answer
Everyday low pricing (EDLP) involves charging a constant everyday low price with few or no temporary price discounts.
9
Question
What is high-low pricing?
Answer
High-low pricing involves charging higher prices on an everyday basis but running frequent promotions to lower prices temporarily on selected items.
10
Question
What is value-added pricing?
Answer
Value-added pricing attaches value-added features and services to differentiate offers, support higher prices, and build pricing power.
11
Question
What does cost-based pricing involve?
Answer
Cost-based pricing involves setting prices based on the costs for producing, distributing, and selling the product plus a fair rate of return for its effort and risk.
12
Question
What are the types of costs in cost-based pricing?
Answer
1. Fixed costs 2. Variable costs 3. Total costs.
13
Question
What are fixed costs?
Answer
Fixed costs are the costs that do not vary with production or sales level, such as rent, heat, interest, and executive salaries.
14
Question
What are variable costs?
Answer
Variable costs are the costs that vary with the level of production, such as packaging and raw materials.
15
Question
What are total costs?
Answer
Total costs are the sum of the fixed and variable costs for any given level of production.
16
Question
What is average cost?
Answer
Average cost is the cost associated with a given level of output.
17
Question
What does competitive-based pricing allow a firm to do?
Answer
Competitive-based pricing allows a firm to consider the price of competing products before setting the initial price.
18
Question
What are the types of market structures that affect pricing?
Answer
1. Pure competition 2. Monopolistic competition 3. Oligopolistic competition 4. Pure monopoly.
19
Question
What is pure competition?
Answer
Pure competition is a market with many buyers and sellers trading uniform commodities where no single buyer or seller has much effect on market price.
20
Question
What is monopolistic competition?
Answer
Monopolistic competition is a market with many buyers and sellers who trade over a range of prices rather than a single market price with differentiated offers.
21
Question
What is oligopolistic competition?
Answer
Oligopolistic competition is a market with few sellers because it is difficult for sellers to enter, who are highly sensitive to each other's pricing and marketing strategies.
22
Question
What is pure monopoly?
Answer
Pure monopoly is a market with only one seller. In a regulated monopoly, the government permits a price that will yield a fair return. In a non-regulated monopoly, companies are free to set a market price.
23
Question
What are the factors to consider when setting prices?
Answer
Factors include: 1. Unique product 2. Quality 3. Prestige 4. Substitute products 5. Cost relative to income.
24
Question
What external factors affect price decisions?
Answer
External factors affecting price decisions include: 1. Economic conditions 2. Resellers' response to price 3. Government 4. Social concerns.
25
Question
What is market skimming pricing?
Answer
Market skimming pricing is a strategy with high initial prices to skim revenue layers from the market, requiring product quality and image to support the price.
26
Question
What is market penetration pricing?
Answer
Market penetration pricing sets a low initial price to penetrate the market quickly and deeply to attract a large number of buyers quickly to gain market share.
27
Question
What is product line pricing?
Answer
Product line pricing takes into account the cost differences between products in the line, customer evaluation of their features, and competitors' prices.
28
Question
What is optional product pricing?
Answer
Optional product pricing takes into account optional or accessory products along with the main product, such as handphone accessories.
29
Question
What is captive product pricing?
Answer
Captive product pricing involves products that must be used along with the main product.
30
Question
What is by-product pricing?
Answer
By-product pricing refers to products with little or no value produced as a result of the main product, where producers seek little or no profit other than the cost to cover storage and delivery.