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demand oriented pricing approaches (8)
weigh factors underlying expected customer tastes and preferences more heavily than such factors as cost, profit and competition when selecting a price level (skimming, penetration, prestige, price lining, odd-even, target, bundle, yield management)
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Skimming Price
setting the highest initial price that customers really desiring the product are wiling to pay (new product)
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penetration pricing
setting a low initial price on a new product to appeal immediately to the mall market (opposite of skimming)
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prestige pricing
setting a high price so that quality or status-conscious consumers will be attracted to the product and buy it
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price lining
often a firm that is selling not just a single product but a line of products may price them at a number of different specific pricing points
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odd-even pricing
setting prices a few dollars or cents under an even number ($499.99)
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target pricing
estimate the price that the ultimate consumer would be willing to pay for a product then working backward through markups taken by retailers and wholesalers to determine what price they can charge wholesalers for the product
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bundle pricing
the marketing of two or more products in a single package price
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yield management pricing
charging of different prices to maximize revenue for a set amount of capacity at any given time (airlines, hotels, cruises) vary by time, day, week, season
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cost oriented pricing approaches (3)
standard markup, cost-plus pricing, experience curve pricing
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standard markup pricing
adding a fixed percentage to the cost of all items in a specific product class
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cost-plus pricing
summing the total unit cost of providing a product or service and adding a specific amount to the cost to arrive at price. two forms: cost-plus percentage-of-cost pricing and cost-plus fixed-free pricing
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cost-plus percentage-of-cost pricing
a fixed percentage is added to the total unit cost
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cost-plus fixed-free pricing
a supplier is reimbursed for all costs, regardless of what they turn out to be but is allowed only a fixed fee as profit that is independent of the final cost of the project
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experience curve pricing
based on the learning effect, which holds that the unit cost for many products and services declines by 10% to 30% each time a firm's experience at producing and selling them doubles
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profit-oriented pricing approaches (3)
target profit pricing, target return on sales pricing, target return on investment pricing
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target profit pricing
a firm may set an annual target of a specific dollar profit
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target return on sales
to set a typical prices that will give them a profit that is a specified percentage
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target return on investment
a method of setting prices to achieve this target
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competition-oriented pricing approaches (3)
customary pricing, above at or below market pricing, loss-leader pricing
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customary pricing
some products where tradition, a standardized channel of distribution, or other competitive factors dictate the price
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above-at or below market pricing
setting a market price for a product or product class based on subjective feel for the competitor's price or market price as the benchmark
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loss-leader pricing
for a special promotion retail stores deliberately sell a product below its customary price to attract attention to it. will buy other products as well
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step 5
set the list or quoted price
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one-price policy
fixed pricing- setting one price for all buyers of a product or service
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flexible-price policy
dynamic pricing setting different prices for products and services depending on individual buyers and purchase situations
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product line pricing
setting of prices for all items in a product line, determine the lowest-prices and highest
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price war
involves successive price cutting by competitors to increase or maintain their unit sales or market share
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step 6
make special adjustments to the list or quoted price
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discounts
reductions from the list price that seller gives a buyer as a reward for some activity of the buyer that is favorable to the seller
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quantity discounts
reductions in unit costs for a larger order
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cumulative discounts
accumulation of purchases of a product over a given time period (typically a year)
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noncumulative
based on the size of an individual purchase order (large orders, not series)
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seasonal discounts
encourages buyers to stick inventory earlier than their normal demand would require
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trade (functional discounts)
to reward wholesalers and retailers for marketing functions they will perform in the future - reductions off the list or base price are offered to resellers in the marketing channel
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cash discounts
to encourage retailers to pay their bills quickly
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allowances
reductions from list or quoted prices to buyers for performing some activity
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trade-in allowances
a price reduction given when a used product is part of the payment on a new product-lower what the customer has to pay instead of lowering the price
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promotional alloances
cash payments or extra amount of "free goods" awarded sellers and the channel of distribution for undertaking certain advertising or selling activities to promote a product
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