a pricing strategy that relies on the promotion of sales during which prices

A pricing strategy that relies on the promotion of

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a pricing strategy that relies on the promotion of sales, during which prices are temporarily reduced to encourage purchases; attractive b/c attracts those who are not price sensitive & are willing to pay the high price & more price-sensitive customers who wait for the low sale price Reference price: price against which buyers compare actual selling price of product & that facilitates their evaluation process; reg price vs sales price Market penetration strategy: growth strategy that employs the existing marketing mix & focuses the firms efforts on existing customers; objective is to build sales, market share & profits quickly; set initial price low for introduction Experience curve effect: drop in unit cost as accumulated volume sold increases; as sales continue to grow, costs continue to drop, allowing further reductions in price Drawbacks of penetration strategy: 1. Firms must have the capacity to satisfy a rapid rise in demand, 2. Low price doesn’t signal high quality, 3. Firms should avoid a penetration pricing strategy if some segments of the market are willing to pay more for the product Price skimming: strategy of selling a new product/service @ high price that innovators & early adopters are willing to pay in order to obtain it; after the high-price market segment becomes saturated & sales begin to slow down, the firm generally lowers the price to capture (or skim) the next most price sensitive segment Regular price: Better Business Bureau suggests that @ least 50% of sales occurred @ that price Loss leader pricing: takes the tactic of leader pricing one step further by lowering the price below the store’s cost; buy one get one free Bait and switch: deceptive practice luring customers into store w/ very low advertised price on item, to pressure them into purchasing higher-price model by disparaging the low-priced item, comparing it unfavorably w/ higher-priced model, or professing inadequate supply of lower-price item Price discrimination: practice of selling same product to diff resellers or to ultimate consumer @ diff prices; some, but not all, forms are illegal Price fixing: practice of colluding w/ other firms to control prices; horizontal price fixing: occurs when competitors that product & sell competing products collude to control prices, effectively taking price out of decision process for consumers, illegal under Sherman Antitrust Act; vertical price fixing: when parties @ diff levels of same marketing channel agree to control prices passed on to consumers; gray area Manufacturer’s suggested retail price (MSRP): price that manufacturers suggest retailers use to sell their merchandise Marketing channel management/ supply chain man: set of approaches & techniques firms employ to efficiently & effectively integrate suppliers Wholesalers: those firms engaged in buying, taking title to, often storing, & physically handling goods in large quantities, then reselling the goods (usually in smaller quantities) to retailers or industrial or business users
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