Chapter 13: Setting the Right Price Flashcards Preview

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Flashcards in Chapter 13: Setting the Right Price Deck (43)
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1
Q

Price

A

That which is given up in an exchange to acquire a good or service.

2
Q

Revenue

A

The price per unit charged to customers multiplied by the number of units sold. Price x quantity.

3
Q

Costs

A

The combined financial value of all inputs that go into the production of a company’s products, both directly and indirectly.

4
Q

Profit

A

Revenues minus expenses.

5
Q

Return on investment (ROI)

A

Net profits divided by the investment.

6
Q

Market share

A

A company’s product sales as a percentage of total sales for that industry.

7
Q

Status quo pricing

A

A pricing objective that maintains existing prices or meets the competition’s prices.

8
Q

Four steps in setting the right price on a product

A

1) Establish pricing objectives 2) estimate demand, costs, and profits 3) choose a price strategy to help determine a base price 4) fine-tune the base price with pricing tactics.

9
Q

Different Pricing Objectives

A

Profit-oriented pricing objectives (pursuing profit maximization or satisfactory profits or target ROI); sales-oriented pricing objectives (pursuing market share or sales maximization); status quo pricing (pursuing the status quo price).

10
Q

Price sensitivity

A

Consumer’s varying levels of desire to buy a given product at different price levels.

11
Q

Price elasticity of demand

A

A measurement of change in consumer demand for a product relative to the changes in its price.

12
Q

Break-even analysis

A

The calculation of number of units sold, or total revenue required, a firm must meet to cover its costs, beyond which profit will occur. Formula: Fixed costs / (Variable price per unit / Variable cost per unit)

13
Q

Price strategy

A

A basic, long-term pricing framework that establishes the initial price for a product and the intended direction for price movements over the product life cycle. Price strategies are price skimming, penetration pricing, or status quo pricing.

14
Q

Price skimming

A

A high introductory price, often coupled with heavy promotion to skim the cream off the top and people are willing to pay more for a perceived above-average product.

15
Q

Penetration pricing

A

A relatively low price for a product initially as a way to reach the mass market.

16
Q

Experience curves

A

Curves that show costs declining at a predictable rate s experience with a product increases.

17
Q

Base price

A

The general price level at which the company expects to sell the good or service.

18
Q

Quantity discount

A

A unit price reduction offered to buyers buying either in multiple units or at more than a specified dollar amount.

19
Q

Cumulative quantity discount

A

A deduction from list price that applies to the buyer’s total purchases made during a specific period. (Spend more than $600 in this time period and get a discount).

20
Q

Noncumulative quantity discount

A

A deduction from list price that applies to a single order rather than to the total volume of orders placed during a certain period. (Buy three or more of a product for a discount).

21
Q

Cash discount

A

A price reduction offered to a consumer, an industrial user, or a marketing intermediary in return for prompt payment of a bill.

22
Q

Functional discount (trade discount)

A

A discount to wholesalers and retailers for performing channel functions.

23
Q

Seasonal discounts

A

A price reduction for buying merchandise out of season.

24
Q

Value-based pricing

A

Setting the price at a level that seems to the customer to be a good price compared with the prices of other options.

25
Q

FOB (free on board) origin pricing

A

The buyer absorbs the freight costs from the shipping point (“free on board”).

26
Q

Uniform delivered pricing

A

The seller pays the actual freight charges and bills every purchaser an identical, flat freight charge.

27
Q

Zone pricing

A

A modification of uniform delivered pricing that divides the total market into segments or zones and charges a flat freight rate to all customers in a given zone.

28
Q

Freight absorption pricing

A

The seller pays all or part of the actual freight charges and does not pass them on to the buyer.

29
Q

Basing-point pricing

A

Charging freight from a given (basing) point, regardless of the city from which the goods are shipped. Mostly illegal now.

30
Q

Single-price tactic

A

Offering all goods and services at the same price (or perhaps two or three prices).

31
Q

Flexible pricing (variable pricing)

A

Different customers pay different prices for essentially the same merchandise bought in equal quantities.

32
Q

Professional services pricing

A

Used by people with experience, training, and often certification, fees are typically charged at an hourly rate, but may be based on the solution of a problem or performance of an act.

33
Q

Price lining

A

Offering a product line with several items at specific price points.

34
Q

Loss-leader pricing

A

A product is sold near or even below cost in the hope that shoppers will buy other items once they are in the store.

35
Q

Odd-even pricing (psychological pricing)

A

Odd-numbered prices connote bargains, and even-numbers prices imply quality.

36
Q

Price bundling

A

Marketing two or more products in a single package for a special price.

37
Q

Unbundling

A

Reducing the bundle of services that comes with the basic product.

38
Q

Two-part pricing

A

Charging two separate amounts to consume a single good or service.

39
Q

Bait pricing

A

A price tactic that tries to get consumers into a store through false or misleading price advertising and then uses high-pressure selling to persuade consumers to buy more expensive merchandise instead.

40
Q

Deceptive pricing

A

Promoting a price or price saving that is not actually available.

41
Q

Price fixing

A

An agreement between two or more firms on the price they will charge for a product.

42
Q

Predatory pricing

A

The practice of charging a very low price for a product with the intent of driving competitors out of business or out of a market.

43
Q

Resale price maintenance

A

Attempts by a producer to control a store’s retail price for the product.