MKTG 3000 Lecture Notes - Lecture 20: Status Quo, Private Label, Product Differentiation
Quiz on Chapter 13&14 due Nov 13th
New Product Pricing
-skimming= going in with a high price. Good to try and recover intitial investments. Good for
unique products.
-penetrating= go in low and get a big market share. Block competitors.
-more of a convenience type good.
-can lead to lower cost per unit as production expands
-discourages or blocks competition from market entry
-boosts sales and privdes large profit increases
-disadvantages:
-require gear up for mass prdocution, selling large volumes at low prices, strategy to
gain market share may fail, may establish low value perception
Status quo pricing= looking at competitors. Matching competitors.
Methods used to set price
-mark-up pricing (mark it up to make budgets) often used in retail. Walmart—large amounts of
SKUs.
-keystoning (when small specialty stores double the price for consumers)
-profit mazimation pricing (need to understand how elastic things are, and volumes at different
price levels. )
-break-even pricing (either in time or units sold. Used when you are thinking about price
discounts.
Competition as the basis for pricing
-customary (soft drinks in different distribution situations)
-how do I compare with everything that is out there?
-above market, at market, or below market?
-should understand relative delivery of value verses competitive set when using this guideline
-most important when there is little product differentiation, perceived homogneous, important
in private label, copycats
find more resources at oneclass.com
find more resources at oneclass.com
Document Summary
Penetrating= go in low and get a big market share. Can lead to lower cost per unit as production expands. Require gear up for mass prdocution, selling large volumes at low prices, strategy to gain market share may fail, may establish low value perception. Mark-up pricing (mark it up to make budgets) often used in retail. Keystoning (when small specialty stores double the price for consumers) Profit mazimation pricing (need to understand how elastic things are, and volumes at different price levels. ) Break-even pricing (either in time or units sold. Used when you are thinking about price discounts. Should understand relative delivery of value verses competitive set when using this guideline. Most important when there is little product differentiation, perceived homogneous, important in private label, copycats. Setting the right price: establish pricing goals, estimate demand, costs and profits. If-thens: choose a price strategy, fine-tune with pricing tactics, results lead to the right price.
