chap 11

Question 1

what is price

Answer 1

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

Question 2

what is revenue

Answer 2

the price per unit charged to customers multiplied by the number of units sold

Question 3

what is profit

Answer 3

revenue minus expenses

Question 4

what are the 4 steps in setting prices

Answer 4

-set pricing objectives (sales/profit/status quo)
-estimate demand, cost, profits
-choose a price strat (skimming/penetration or status quo)
-fine-tune with tactics

Question 5

describe the 5 common pricing strats

Answer 5

-price skimming: high introductory $ with heavy promotion
-penetration pricing: low price to reach mass market
-status quo pricing: identical or very close compet price
-cost-plus pricing: cost+ markup considering market condition and brand equity
-value-based pricing: based on perceived value, logical and objective approach

Question 6

demand elasticity

Answer 6

non essential, many alternatives (car , fasion, restaurant

Question 7

demand inelasticity

Answer 7

essential, few alternatives (basic food item, electricity)

Question 8

what is markup

Answer 8

the profit-producing device of price and thus must be a component of each pricing tactic.
𝐌𝐚𝐫𝐤𝐮𝐩 𝐢𝐧 $=𝐒𝐞𝐥𝐥𝐢𝐧𝐠 𝐏𝐫𝐢𝐜𝐞−𝐂𝐨𝐬𝐭
To calculate price, using markup on cost:
𝐏𝐫𝐢𝐜𝐞=𝐂𝐨𝐬𝐭(𝟏+ 𝐌𝐚𝐫𝐤𝐮𝐩 𝐨𝐧 𝐂𝐨𝐬𝐭 %)
on cost percentage
𝐌𝐚𝐫𝐤𝐮𝐩 𝐨𝐧 𝐂𝐨𝐬𝐭 (𝐢𝐧 %)=(𝐌𝐚𝐫𝐤𝐮𝐩 $)/𝐂𝐨𝐬𝐭 𝐱 𝟏𝟎𝟎

Question 9

what is quantity discount

Answer 9

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

Question 10

cash discount

Answer 10

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

Question 11

what is personal services pricing

Answer 11

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

Question 12

what is loss leader pricing

Answer 12

a product is sold near or even below co t in the hope that shoppers will buy other items once they are in the store

Question 13

what is price bundling

Answer 13

marketing two or more products in a single package for a special price ex: bell

Question 14

what is bait pricing

Answer 14

advertising an item at an unrealistically low price as ‘bait’ to lure customers to a store or selling place

Question 15

what is value-based pricing

Answer 15

companies base their pricing on how much the customer believes a product is worth

Question 16

what is seasonal discount

Answer 16

a price reduction for buying merchandise out of season quickly, often in real time

Question 17

price strategy vs price tactic

Answer 17

• defines the initial price for a product as a means of achieving the set pricing objective
• various strategies and approaches used by businesses to determine and adjust pricing for their products and services in the online marketplace.

Question 18

what is breakeven strategy

Answer 18

the calculation of number of units sold, or total revenue required, that a company must meet to cover its costs, beyond which profit occurs

Question 19

what are the legal or ethical issues

Answer 19

baith pricing, deceptive pricing, price fixing, predatory pricing, resale price maintenance, price discrimination