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Managing Pricing Strategies
Terms in this set (26)
prices that buyers carry in their minds and refer to when they look at a given product
consumers assume higher-priced product has higher quality
Consumers view odd-number pricing as being cheaper than even-numbers
ending in .99 is cheaper
"left" to "right" pricing ($299 vs. $300)
odd number discount perceptions
"sale" written next to price
changes in price have large effects on the amount demanded
A situation in which an increase or a decrease in price will not significantly affect demand for the product
average cost falls with accumulated production experience. This decline in the average cost with accumulated production experience is called the experience curve or learning curve.
a process in which firms identify the quality and functionality needed to satisfy customers and what price they are willing to pay before the product is designed; the product is manufactured only if the firm can control costs to meet the required price
a process by which a company compares its performance with that of high-performing organizations
adding to the cost of the product at a percentage
designed to produce a specific return on investment, usually expressed as a percentage of sales.
Pricing strategy that emphasizes benefits derived from a product in comparison to the price and quality levels of competing offerings.
Setting price based largely on following competitors' prices rather than on company costs or demand.
auctioning off a product online
direct response survey
most common method to determine customer's perceived value
price sensitivity tends to be far greater in ______ rather than low cost categories
Price sensitivity is likely to increase OR decrease? when:
-absolute dollar cost of the product increases
-the aggregate cost of ongoing usage increases
-cost of the product increases as a percentage of the total cost
responsibility of payment
the extent to which the user if personally responsible for costs, the greater the price sensitivity
price sensitivity is likely to be higher/lower? when:
-customers do not perceive significant differences among competitive offerings
-easy to compare products and prices
-easy to switch among product offerings
in the Westendorp model, price sensitivity relates not to absolute price, but to _________ of the product or service
consumer price expectations and tolerances are measured by asking a set of price perception questions.
The price at which the product or service is....
-so cheap that product quality/value is questionable (Too Inexpensive)
-A bargain (Inexpensive)
-Beginning to seem too expensive (expensive)
-Too expensive to consider (Too Expensive)
the responses to the four questions are graphed
Indifference Price Point
Inexpensive - Expensive
Optimal Price Point
Too inexpensive - Too expensive
Point of Marginal Cheapness
"not cheap" - "too cheap"
Point of Marginal Expensiveness
"not expensive" - "too expensive"
Range of Acceptable prices
PMC - PME
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Understanding Customer Value
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