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Customer Value-Based Pricing
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setting price based on buyers' perceptions of value rather than on the seller's cost
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Value-Based Pricing versus Cost-Based Pricing
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Value-based pricing reverses this process. The company first assesses customer needs and value perceptions. It then sets its target price based on customer perceptions of value.
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Good Value Pricing
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offering just the right combination of quality and good service at a fair price
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Value Added Pricing
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attaching value-added features and services to differentiate a company's offers and charging higher prices
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Cost Based Pricing
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setting prices based on the costs of producing, distributing, and selling the product plus a fair rate of return for effort and risk
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Fixed Costs (Overhead)
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Costs that do not vary with the quantity of output produced
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Variable Costs
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costs that vary with the quantity of output produced
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Total Costs
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the sum of the fixed and variable costs for any given level of production
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Experience Curve (Learning Curve)
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the drop in the average per-unit production cost that comes with accumulated production experience
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Cost-Plus Pricing (Markup Pricing)
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adding a standard markup to the cost of the product
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Break - Even Pricing (Target Return Pricing)
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setting price to break even on the costs of making and marketing a product, or setting price to make a target return
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Competition-Based Pricing
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setting prices based on competitors' strategies, prices, costs, and market offerings
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Target Costing
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pricing that starts with an ideal selling price, then targets costs that will ensure that the price is met
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Pure Competition
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the market consists of many buyers and sellers trading in a uniform commodity, such as wheat, copper, or financial securities
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Monopolistic Competition
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the market consists of many buyers and sellers trading over a range of prices rather than a single market price
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Oligopolistic Competition
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the market consists of only a few large sellers
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Pure Monopoly
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the market is dominated by one seller
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Demand Curve
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a curve that shows the number of units the market will buy in a given time period at different prices that might be charged
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Price Elasticity
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a measure of the sensitivity of demand to changes in price
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Which of the following statements does NOT describe price?
answer
A. Price is the sum of all the values that customers give up to gain the benefits of having or using a product or service.
B. Price remains one of the most important elements that determine a firm's market share and profitability.
C. Prices can be changed quickly.
*D. Price is the only element in the marketing mix that represents costs.
E. Price is one of the most flexible marketing mix elements.
B. Price remains one of the most important elements that determine a firm's market share and profitability.
C. Prices can be changed quickly.
*D. Price is the only element in the marketing mix that represents costs.
E. Price is one of the most flexible marketing mix elements.
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Which of the following statements does not apply to the description of prices?
answer
A. Price is the amount of money charged for a product or a service.
*B. In recent decades price factors have gained increasing importance.
C. Pricing is the number-one problem facing many marketing executives.
D. Historically, price has been the major factor affecting buyer choice.
E. Price remains one of the most important elements that determine a firm's market share.
*B. In recent decades price factors have gained increasing importance.
C. Pricing is the number-one problem facing many marketing executives.
D. Historically, price has been the major factor affecting buyer choice.
E. Price remains one of the most important elements that determine a firm's market share.
question
__________ uses buyers' perceptions of value as the key to pricing.
answer
A. Good-value pricing
B. Cost-based pricing
C. Value-added pricing
D. High-low pricing
*E. Customer value-based pricing
B. Cost-based pricing
C. Value-added pricing
D. High-low pricing
*E. Customer value-based pricing
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The goal of the competition-based pricing is __________.
answer
A. to increase customers' price perceptions
B. to increase value and lower prices to beat competition
C. to match competitors' prices
*D. not to match or beat competitors' price
E. to beat competitors' prices
B. to increase value and lower prices to beat competition
C. to match competitors' prices
*D. not to match or beat competitors' price
E. to beat competitors' prices
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__________ reverses the usual process of first designing a new product, determining its cost, and then asking, "Can we sell it for that?"
answer
A. Good-value pricing
B. Value-added pricing
*C. Target costing
D. Cost-based pricing
E. Customer value-based pricing
B. Value-added pricing
*C. Target costing
D. Cost-based pricing
E. Customer value-based pricing
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Under __________, the market consists of many buyers and sellers trading in a uniform commodity.
answer
*A. pure competition
B. target competition
C. oligopolistic competition
D. monopolistic competition
E. a pure monopoly
B. target competition
C. oligopolistic competition
D. monopolistic competition
E. a pure monopoly
question
For streaming video companies, operating the web portal is an example of __________________ while royalties for each view is an example of ___________________.
answer
A. a variable cost; a base cost
B. variable cost; a fixed cost
*C. a fixed cost; a variable cost
D. a price ceiling; a price floor
E. inelasticity; elasticity
B. variable cost; a fixed cost
*C. a fixed cost; a variable cost
D. a price ceiling; a price floor
E. inelasticity; elasticity
question
If Netflix should want to charge a price premium for its streaming service, it would need to employ a __________________ strategy by adding content or features that others simply can't match.
answer
A. cost based
B. variable price
*C. value-added
D. competition- based
E. good-value
B. variable price
*C. value-added
D. competition- based
E. good-value
question
With the influx of highly competitive video streaming options, there is the credible threat of video streaming services becoming commodities. This has the effect of making demand for streaming video ________________.
answer
A. explode
B. invert
*C. elastic
D. inelastic
E. exceed supply
B. invert
*C. elastic
D. inelastic
E. exceed supply
question
In the past, Netflix's superior library of titles allowed the company to freely engage in value-based pricing. Now, other companies like Disney and Apple are posing a significant threat to Netflix's dominance. This may require Netflix to shift to a strategy of _________________.
answer
A. differentiated pricing
B. cost-plus pricing
C. break-even pricing
*D. competition-based pricing
E. good-value pricing
B. cost-plus pricing
C. break-even pricing
*D. competition-based pricing
E. good-value pricing
question
For Amazon, Disney, and Apple, streaming video is a small component of a big portfolio of businesses. This puts pressure on Netflix as it relies on streaming video entirely in order to _______________________.
answer
A. grow its portfolio of content
B. outdo the competition
C. capture market share
*D. generate profits
E. continue as market leader
B. outdo the competition
C. capture market share
*D. generate profits
E. continue as market leader
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