4.5 Price Flashcards
Cost-plus pricing
It involves adding a percentage or predetermined amount of profit to the cost per unit of output to determine the selling price.
Loss leader pricing
It involves setting the price of a product below its costs of production. The purpose is to entice customers to buy other products with high profit margins in addition to purchasing the loss leader product.
Mark-up
It refers to the extra amount charged by a business on top of its unit costs of production in order to earn a profit margin.
Non-pricing strategies
It refers to the methods used by a business to market its products other than by focusing on price.
Penetration pricing
it involves setting low prices to gain entry into a new market. Once the product has established market share, prices can be raised.
Predatory pricing
It involves temporarily setting prices so low that rivals, especially smaller firms, cannot compete at a profitable level.
Price
It refers to the amount paid by a customer to purchase a good or service.
Price discrimination
It involves charging different prices to different groups of customers for the same product.
Price leadership
It is used for best-selling products or brands in a particular market. Customers perceive there to be few substitutes for such products so the dominant firm can set its own prices. Competitors set their prices based on the price of the market leader.
Price skimming
It involves initially charging high prices for innovative or high-tech products. Price is reduced as the novelty wears off and as substitute products appear.
Price wars
It involve business competing any a series of intensive price cuts to threaten the competitiveness of rival firms.
Psychological pricing
It involves rounding down numbers such as $9.99 to make prices seem lower.
