Ch. 21 - Setting the Right Price Flashcards
Price strategy
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 skimming
A pricing policy whereby a firm charges a high introductory price, often coupled with heavy promotion
Penetrating pricing
A pricing policy whereby a firm charges a relatively low price for a product when it is first rolled out as a way to reach the mass market
Status quo pricing
Charging a price identical to or very close to the competition’s price
Unfair trade practice acts
Laws that prohibit wholesalers and retailers from selling below price
Price fixing
An agreement between two or more firms on the price they will charge for a product
Predatory pricing
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
Base price
The general price level which the company expects to sell the good or service
Quantity discount
A price reduction offered to buyers buying in multiple units or above a specified dollar amount
Cumulative quantity discount
A deduction from list price that applies to the buyer’s total purchases made during a specified period
Noncumulative quantity discount
A deduction from list price that applies to a single order rather than to the total volume of orders placed during a certain period
Cash discount
A price reduction offered to a consumer, an industrial user, or a marketing intermediary in return for prompt payment of a bill
Functional discount (trade discount)
A discount to wholesalers and retailers for performing channel functions
Seasonal discount
A price reduction for buying merchandise out of season
Promotional allowance (trade allowance)
A payment to a dealer for promoting the manufacturer’s products
Rebate
A cash refund given for the purchase of a product during a specific period
Value-based pricing
Setting the price at a level that seems to the customer to be a good price compared to the prices of other options
FOB origin pricing
A price tactic that requires the buyer to absorb the freight costs from the shipping point (“free on board”)
Uniform delivered pricing
A price tactic in which the seller pays the actual freight charges and bills every purchaser an identical, flat freight charge
Zone pricing
A modification of uniform delivered pricing that divides the United States (or the total market) into segments or zones and charges a flat freight rate to all customers in a given zone
Freight absorption pricing
A price tactic in which the seller pays all or part of the actual freight charges and does not pass them on to the buyer
Basing-point pricing
A price tactic that charges freight from a given (basing) point, regardless of the city from which the goods are shipped
Single-price tactic
A price tactic that offers all goods and services at the same price )or perhaps two or three prices)
Flexible pricing (variable pricing)
A price tactic in which different customers pay different prices for essentially the same merchandise bought in equal quantities
