price floor

(noun)

the price below which the organization ends up in losses

Related Terms

Examples of price floor in the following topics:

  • Other Inputs to Pricing Decisions

    • Factors to consider in pricing include Economic Value added to Customers (EVC), competitor's pricing, and government regulations.
    • Therefore, to sell a product, a firm needs to price at or below its competitor's price plus the value advantage its product has to the customer over the rival product.
    • The price of two servers from the competitor is $6,800.
    • Price controls are governmental restrictions on the prices that can be charged for goods and services in a market.
    • There are two primary forms of price control, a price ceiling, the maximum price that can be charged, and a price floor, the minimum price that can be charged .

  • Settling the List Price

    • A list price must be close to the maximum price that customers are prepared to pay and yield the maximum profit for the retailer.
    • 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.
    • 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).

  • Product, Placement, Promotion, and Price

    • The price is the amount a customer pays for the product.
    • Adjusting the price has a profound impact on the marketing strategy, and depending on the price elasticity of the product, often it will affect the demand and sales as well.
    • 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 would be the one which could balance between the price floor and the price ceiling and take into account the customer's perceived value.
    • Common pricing strategies include cost-plus pricing, skimming, penetration pricing, value-based pricing, and many more.

  • Trends in Retailing

    • They are capable of offering lower retail prices because of the combined warehouse/retail store model and by offering products in bulk to customers .
    • The new clustering model based upon a bottom up behavioral approach enables retailers to quickly identify clusters of stores with similar demand patterns and to develop truly customer-centric marketing, merchandising, space and pricing strategies.
    • In addition, on line catalogs have cut down on the need for on-site warehousing and the use of expensive retail floor space to display products.
    • The introduction to Just In Time (JIT) techniques have further cut down on floor space usage by promoting product delivery directly from the supplier to the consumer without the need for store or warehouse stocking.

  • Demand-Based Pricing

    • Demand-based pricing, also known as customer-based pricing, is any pricing method that uses consumer demand - based on perceived value - as the central element.
    • These include: price skimming, price discrimination, psychological pricing, bundle pricing, penetration pricing, and value-based pricing.
    • Price skimming is a pricing strategy in which a marketer sets a relatively high price for a product or service at first, then lowers the price over time.
    • Penetration pricing is the pricing technique of setting a relatively low initial entry price, often lower than the eventual market price, to attract new customers.
    • By definition, long term prices based on value-based pricing are always higher or equal to the prices derived from cost-based pricing.

  • 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.

  • Competitor-Based Pricing

    • Competition-based pricing describes a situation where a firm has a pricing policy that reflects the pricing decisions of competitors.
    • Competition-based pricing describes the situation where a firm does not have a pricing policy that relates to its product, but reflects the pricing decisions of competitors.
    • Similar to competition based pricing, going rate pricing reflects the price that is being used by most of the companies within the industry, an industry standard more or less.
    • It can lead to price wars.
    • Show the basis of competitor-based pricing as a general pricing strategy

  • Cost-Based Pricing

    • Cost-based pricing is the act of pricing based on what it costs a company to make a product.
    • Cost-based pricing is the act of pricing based on what it costs a company to make a product.
    • Cost-based pricing involves setting a price such that:
    • Cost-based pricing is included in what is considered the "3 C's" of pricing.
    • Describe cost based pricing as it relates to general pricing strategies

  • High/Low Pricing

    • High-low pricing is a strategy where most goods offered are priced higher than competitors, but lower prices are offered on other key items.
    • High-low pricing is a method of pricing for an organization where the goods or services offered by the organization are regularly priced higher than competitors.
    • The lower promotional prices are designed to bring customers to the organization where the customer is offered the promotional product as well as the regular higher priced products.
    • High-low pricing is a type of pricing strategy adopted by companies, usually small and medium sized retail firms.
    • The way competition prevails in the shoe industry is through high-low price.

  • Value-Based Pricing

    • Value-based pricing seeks to set prices primarily on the value perceived by customers rather than on the cost of the product or historical prices.
    • Value-based pricing sets prices primarily, but not exclusively, on the value, perceived or estimated, to the customer rather than on the cost of the product or historical prices.
    • How important is price?
    • Examples include matching the price of competitors, a traditional price charged for a particular product, and charging a price that covers expected costs.
    • Examine the rationale behind value based pricing as a pricing tactic