MKT 337 Study Guide - Midterm Guide: Price Skimming, Yield Management, Dynamic Pricing
Document Summary
When a firm charges a high price to help promote a high- quality image. When a firm charges a high introductory price, often coupled with heavy promotion. Situations when price skimming is successful: (1) inelastic demand; (2) unique advantages/superior; (3) legal protection of product; (4) technological breakthrough; or (5) blocked entry to competitors. When a firm charges a relatively low price for a product initially as a way to reach the mass market. Advantages: (1) discourages or blocks competition from market entry; (2) boosts sales and provides large profit increases; and (3) can justify production expansion. Disadvantages: (1) requires gear up of mass production; (2) Selling large volumes at low prices; and (3) strategy to gain market share may fail. Price lining: several line items at specific price points. Price bundling: combining two or more products in a single package.
