Developing pricing strategies and programs - Setting the price
13 important questions on Developing pricing strategies and programs - Setting the price
When to use price cues?
- Customers purchase item infrequently
- Customers are new
- Product designs vary over time
- Prices vary seasonally
- Quality or sizes vary across stores
Six steps of price setting:
- Selecting the pricing objective
- Determining Demand
- Estimating Costs
- Analyzing competitors' costs prices and offers
- Selecting a pricing method
- Selecting the Final price
Customers are less price sensitive when
- There are few or no substitutes or competitors
- They do not readily notice the higher price
- They are slow to change their buying habits
- They think the higher prices are justified
- Price is only a small part of the total cost of obtaining, operating and servicing the product over its lifetime
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What is an elastic demand?
Two types of costs
- Fixed costs (overhead); do not vary with production level or sales revnue
- Variable costs; vary directly with the level of production
What is the experience curve/ learning curve?
How can a firm anticipate a competitor's reaction?
- Assume competitor reacts standard
- Assume competitor treats each price difference or change as a fresh challenge and reacts according to self-interest at the time. (research final situation, recent sales, customer loyalty, corporate objectives before setting price)
What are the six price setting methods and their meaning?
- Markup pricing; total project cost + standard markup for profit
- Target-return pricing; costs, profit, and minimal yield to compensate investment are in this price
- Perceived-value pricing; base price on perceived value, deliver more unique value and prove it!
- Value pricing; low costs without sacrificing quality.
- Going-rate; based on price on competitors used when costs are difficult to measure
- Auction-type
What is an English auctions and how is their pricing procedure?
- Have one seller and many buyers
- Bidders raise the offer price until the top price is reached. (ascending bids)
- Highest bidder gets the item
What is a Dutch auction and how is their pricing procedure?
- one seller and many buyers OR one buyer and many sellers
- Auctioneer announces high price, then slowly decreases until bidder accepts
What is a Sealed-Bid auction?
- Suppliers submit one bid, cannot know what the other bids.
Companies can use several pricing techniques to stimulate early purchase, which?
- Loss-leader pricing
- Special event pricing
- Special customer pricing
- Cash rebates
- Low-interest financing(loan)
- Longer payment terms
- Warranties and service contracts(free)
- Psychological discounting(299)
How can the brand leader respond to competitive price cuts?
- Maintain price
- Maintain price add value
- Reduce price
- Increase price and improve quality
- Launch a low-price fighter line
The question on the page originate from the summary of the following study material:
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