identify 3 methods that firms use to set their prices - correct answer ✔✔cost-based, competition based,
value-based
cost-based - correct answer ✔✔markup pricing
competition based - correct answer ✔✔above or below
customary
value-based - correct answer ✔✔improvement value
cost of ownership
Everyday low pricing strategy - correct answer ✔✔promising consumers a low price without the need to
wait for sale price events or comparison shopping
example of everyday low pricing - correct answer ✔✔Walmart communicates that for any given group of
often purchased items, its prices will tend to be lower than those of any company in market
High/Low pricing strategy - correct answer ✔✔where a firm initially charges a high price for a product
and later, when it has become less desirable, sells it at a discount or through clearance sales. It is
appealing at first because it attracts 2 distinct market segments: non price sensitive (willing to pay the
high price), price sensitive customers (wait for the low-price sales price). Often communicate their
strategy through creative use of reference prices.
price skimming - correct answer ✔✔appeals to these segments of consumers who are willing to pay the
premium price to have the innovation first. (starts high)
(ex: iphones)
market penetration pricing - correct answer ✔✔set the initial price low for the introduction of the new
product/service. (as sales continue to grow, the costs continue to grow)
, tactics used to reduce prices to consumers (9) - correct answer ✔✔markdowns, quantity discounts,
seasonal discounts, coupons, rebates, leasing, price bundling, leader pricing, price lining
price tactics - correct answer ✔✔short term response to competitive threat or broadly accept method of
calculating a final price for the customer that is short term in nature
markdowns - correct answer ✔✔reductions retailers take on the initial selling price of the
product/service
seasonal discounts - correct answer ✔✔an additional reduction offered as an incentive to retailers to
order merchandise in advance of the normal buying season (ex: christmas decorations go on sale after
christmas)
coupons - correct answer ✔✔offer a discount on the price of specific items when they're purchased
rebates - correct answer ✔✔provide another form of discounts for consumers off the final selling price
leasing - correct answer ✔✔consumers pay a fee to purchase the right to use a product for a specific
amount of time then give it back (ex: cars, gowns/suits)
price bundling - correct answer ✔✔practice of selling more than one product for a single, lower price
(ex: T-mobile = free Netflix)
leader pricing - correct answer ✔✔attempts to build store traffic by aggressively pricing and advertising
a regularly purchased item, often priced at or just above the store's cost (ex: happy hour restaurants and
bars).
price lining - correct answer ✔✔establish a price floor or price ceiling for an entire line of similar
products and then set a few other price points in between to represent distinct difference in quality (ex:
purchasing middle quality items bc you dont want to look cheap and cant afford the higher priced item).
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller BravelRadon. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $14.99. You're not tied to anything after your purchase.