Price Points

(noun)

Price points are prices at which demand for a given product is supposed to stay relatively high.

Related Terms

Examples of Price Points in the following topics:

  • Terms Used to Describe Price

    • Dollar General is a general store or "five and dime" store that sets price points only at even amounts, such as exactly one, two, three, five, or ten dollars (among others).
    • The price of an item is also called the price point, especially where it refers to stores that set a limited number of price points.
    • For example, Dollar General is a general store or "five and dime" store that sets price points only at even amounts, such as exactly one, two, three, five, or ten dollars (among others).
    • Other stores (such as dollar stores, pound stores, euro stores, 100-yen stores, and so forth) only have a single price point ($1, £1, 1€, ¥100), though in some cases this price may purchase more than one of some very small items.
    • From a customer's point of view, value is the sole justification for price.

  • Product Line Pricing

    • Line pricing is the use of a limited number of price points for all the product offerings of a vendor.
    • Line pricing is the use of a limited number of prices for all the product offerings of a vendor.
    • Its underlying rationale is that these amounts are seen as suitable price points for a whole range of products by prospective customers.
    • From the seller's point of view, line pricing holds several benefits:
    • The product and service mix can then be tailored to select price points.

  • Demand-Based Pricing

    • For example, items are typically priced at a point a little less than a round number ($2.99).
    • These include: price skimming, price discrimination and yield management, price points, psychological pricing, bundle pricing, penetration pricing, price lining, value-based pricing, geo and premium pricing.
    • Price points are prices at which demand for a given product is supposed to stay relatively high .
    • Psychological pricing is one cause of price points.
    • Illustration of price points, or concave-downward cusps on a demand curve (P is price; Q is quantity demanded; A, B, and C are the price points)

  • Calculating Elasticities

    • This happens because the price elasticity of demand often varies at different points along the demand curve and because the percentage change is not symmetric.
    • This measure requires just two points for quantity demanded and price to be known; it does not require a function for the relationship.
    • The point elasticity is the measure of the change in quantity demanded to a tiny change in price.
    • $Point-Price\quad Elasticity\quad =\quad \frac { P }{ { Q }_{ d } } \times \frac { \Delta { Q }_{ d } }{ \Delta P }$
    • In the formula above, dQ/dP is the partial derivative of quantity with respect to price, and P and Q are price and quantity, respectively, at a given point on the demand curve.

  • Psychological Pricing

    • Psychological pricing is a marketing practice based on the theory that certain prices have meaning to many buyers.
    • Inferring quality from price is a common example of the psychological aspect of price.
    • Another manifestation of the psychological aspects of pricing is the use of odd prices.
    • We call prices that end in such digits as 5, 7, 8, and 9 "odd prices. " Examples of odd prices include: $2.95, $15.98, or $299.99 .
    • Psychological pricing is one cause of price points.

  • Impacts of Price Changes on Consumer Surplus

    • Consumer surplus decreases when price is set above the equilibrium price, but increases to a certain point when price is below the equilibrium price.
    • A binding price ceiling is one that is lower than the pareto efficient market price.
    • At some point the benefit from the drop in price will be outweighed by the decrease in the good's availability.
    • When a price floor is set above the equilibrium price, consumers will have to purchase the product at a higher price.
    • An increase in the price will reduce consumer surplus, while a decrease in the price will increase consumer surplus.

  • Settling the List Price

    • Pricing is a key variable in micro-economic price allocation theory and part of the four "P's-" of the marketing mix; pricing, product, promotion and place.
    • The manufacturer's suggested retail price (MSRP), list price or recommended retail price (RRP) of a product is the price which the manufacturer recommends to the retailer.
    • Value to the customer should be taken into consideration in addition to pricing objectives, profit maximization, geographic and buying habit considerations, discounting, rate of return, competitive indexing, the image conveyed by the price, customer price sensitivity, any legal restrictions, the category price points, price ceilings and floors and how payment is to be made.
    • From the marketer's point of view, an efficient price is a price that is very close to the maximum that customers are prepared to pay.
    • A good pricing strategy is one that strikes a balance between the price floor (the price below which the organization ends up in losses) and the price ceiling (the price beyond which the organization experiences a no demand situation).

  • Geographic Pricing

    • Ownership of the goods is transferred to the buyer as soon as it leaves the point of origin.
    • Uniform delivery pricing (also called postage stamp pricing): The same price is charged to all.
    • Zone pricing: Prices increase as shipping distances increase.
    • Basing point pricing: Certain cities are designated as basing points.
    • All goods shipped from a given basis point are charged the same amount.

  • Interpretations of Price Elasticity of Demand

    • Perfectly inelastic demand is graphed as a vertical line and indicates a price elasticity of zero at every point of the curve.
    • Since PED is measured based on percent changes in price, the nominal price and quantity mean that demand curves have different elasticities at different points along the curve.
    • In this case the PED value is the same at every point of the demand curve.
    • The PED value is the same at every point of the demand curve.
    • The price elasticity of demand for a good has different values at different points on the demand curve.

  • Disinflation

    • As profits decline, employers lay off employees, and unemployment rises, which moves the economy from point A to point B on the graph.
    • As profits increase, employment also increases, returning the unemployment rate to the natural rate as the economy moves from point B to point C.
    • Assume the following annual price levels as compared to the prices in year 1:
    • Between Year 2 and Year 3, the price level only increases by two percentage points, which is lower than the four percentage point increase between Years 1 and 2.
    • Between Years 4 and 5, the price level does not increase, but decreases by two percentage points.