1. Product
2. Price
3. Promotion (advertising)
4. Place (distribution)
Answer: Create perceptions of uniqueness or prevent consumers from discovering the lack of uniqueness
Answer: Firms engage in PD in order to enhance utility and avoid commoditization. However, if brands lack unique value and consumers cannot assess utility objectively and accurately, firms may be tempted to manipulate perceptions of uniqueness.
1. consumers are willing to pay in approximate relation to the utility they receive, and will not pay extra if utility is equivalent across offerings
2. can assess relative utility with some accuracy
Answer: Price high throughout the period but insert random discounts.
Attractive when the market consists of informed and uninformed consumers. The informed ones will wait for the discount. The uninformed will buy on need -- most often at the high price.
Answer: Price high at the beginning of the period, then lower the price at the end of the period to lure consumers who are less "quality-sensitive" (clothing seasonality).
Well defined time period, not restricted to durable goods.
Answer: Initially price for the least sensitive market, then successively lower the price to attract additional segments (phones)
Does not work if there's competition, restricted to durable goods.
Answer: Second market discounting is when firms produce an unbranded version of the product (perhaps of the same quality) in order to take advantage of unused capacity.
It is attractive when production does not increased fixed costs and cannibalization is negligible.
1. price lining
2. second market discounting
3. sequential skimming
4. periodic discounting
5. random discounting
Answer: Firms price line when they offer different product or quality variations at different prices. Consumers self-select into the price they are willing to pay.
Answer: Segment the market based on a consumer's willingness to pay. The problem for the marketer is to determine how to price a product in a market in which price sensitivity is heterogeneous while appealing to as many consumers as possible.
Answer: It is unlikely that a firm's product is the dominating alternative. Therefore when the firm enjoys an advantage, it likely fares less well on some dimensions, which must be considered separately.
EV = price of the next best alt + monetary value of each advantage -monetary value of each disadvantage
-economic value (post-purchase costs)
-functional value
-experiential value
-social value
-ability to pay at this time
-myopia (over-discounting of future savings)
-uncertainty / ignorance about the true value
-switching costs / loyalty
-perceptions of fairness
Expected value to the customer is the maximum a customer should be willing to pay for your product. It is the purchase price of the next best alternative +/- the value difference between the next best alt and your product. (see chart)
Answer: Contributes via the marketing concept ("target costing"). The consumer is the focal point. In the pricing instance, the emphasis is not on customer attraction or retention but rather on profit-maximization by extracting as much as possible out of the consumer.
Answer: Understanding elasticity is essential for making a variety of judgements about price-setting but also assessment of competition.
Costs are central variables in the BE formula
Answer: Accounting can provide essential information related not only to total costs but also the source of costs. Marketers can use this information to make tactical decisions about pricing and price changes.
Answer: Maintaining brand loyalty. Elasticity is the % change in quantity demanded/% change in price, which can be interpreted as brand loyalty.
1. Cost based pricing -- simplistic pricing policies that focus internally on costs will not be sensitive to a consumer's willingness to pay
2. the invisible handshake -- perceived unfairness may suppress price increases if a long-term relationship between the customer and the firm is to be created