Chapter 10

Question 1

price

Answer 1

the money charged for a product/service, or the sum of the values that customers exchange for the benefits of having or using the product/service

Question 2

Customer value-based pricing

Answer 2

setting price based on buyers’ perspectives of value rather than the seller’s cost

Question 3

Everyday low pricing (EDLP)

Answer 3

involved charging a constant everyday low price with few or no temporary price discounts

Question 4

High-low pricing

Answer 4

charging higher prices on an everyday basis but running frequent promotions to lower prices temporarily on selected items

Question 5

good-value pricing

Answer 5

offering just the right combination of quality and good service at a fair price

Question 6

value-added pricing

Answer 6

attaching a value-added features and services to differentiate a company’s offers and charging higher prices

Question 7

cost-based pricing

Answer 7

setting prices based on the costs of producing, distributing, and selling the product plus a fair rate of return for effort and risk

Question 8

experience curve (learning curve)

Answer 8

the drop in average cost with accumulated production experience

Question 9

cost-plus pricing

Answer 9

adding a standard markup to the cost of the product

Question 10

pros and cons of cost-plus pricing

Answer 10

pros:
sellers are certain about costs
price competition is minimised
buyers feel its fair

cons:
ignore demand and competitor prices

Question 11

brake-even pricing (target return pricing)

Answer 11

setting price to breakeven on the costs of making and marketing a product or setting to make a target return

Question 12

competition-based pricing

Answer 12

setting prices based on competitors’ strategies, prices, costs and market offerings

Question 13

target costing

Answer 13

pricing that starts with an ideal selling price, then targets costs that will ensure that price is met