Chapter 10 Flashcards
What is a price?
The amount of money charged for a product or a service, or the sum of the values that customer exchange for the benefits of having or using the product or service.
What is customer value-based pricing?
Setting price based on buyers’ perceptions of value rather than on the seller’s cost.
What is good-value pricing?
Offering just the right combination of quality and good service at fair price.
What types of pricing strategies are there?
Customer value-based pricing
Cost-based pricing
Competition based pricing
What is value-added pricing?
Attaching value-added features and services to differentiate a company’s offers and changing higher prices.
What is cost-based pricing?
Setting prices based on the costs for producing, distributing, and selling the product plus a fair rate of return for effort and risk.
What types of costs are there?
Fixed costs (overhead) -costs that do not vary with production or sales Variable costs - costs that vary directly with the level of production. Total costs - The sum of fixed and variable costs for any given level of production.
What is cost-plus pricing (or markup pricing)?
Adding a standard markup to the cost of the product?
What is break-even pricing?
Setting price to break even on the costs of making and marketing a product, or setting the price to make a target return.
What is competition-based pricing?
Setting prices based on competitors’ strategies, prices, costs, and market offerings.
What is target costing?
Pricing that starts with an ideal selling price, and then targets costs that will ensure that the price is met.
What is demand curve?
A curve that shows the number of units the market will buy in a given time period, at different prices that might be charged.
What is price elasticity?
A measure of the sensitivity of demand to changes in price.
What is market-skimming pricing?
Setting a high price for a new product to skim maximum revenues layer by layer from segments willing to pay the high price; the company makes fewer but more profitable sales.
What market-penetration pricing?
Setting a low initial price for a new product in order to attract a large number of buyers and a large market share.
What is product line pricing?
Setting the price steps between various products in a product line based on cost differences between the products, customer evaluation of different features, and competitors’ prices.
What is Optional-product pricing?
The pricing of optional or accessory products along with the main product.
What is Captive-product pricing?
Setting a price for products that must be used along with a main product, such as blades for a razor and games for a video-game console.
What is by-product pricing?
Setting for by-products to make the main product’s price more competitive.
What is product bundle pricing?
Combining several products and offering the bundle at a reduced price.
What is a discount?
A straight reduction in price on purchases during a stated period of time or on large quantities.
What is allowance?
Promotional money paid by manufacturers to retailers in return for an agreement to feature the manufacturer’s products in some way.
What is segmented pricing?
Selling a product or service at two or more prices, where the difference in prices is not based on differences in costs.
What is psychological pricing?
Pricing that considers the psychology of prices and not simply the economics; the price is used to say something about the product.
What is reference prices?
Prices that buyers carry in their minds and refer to when they look at a given product.
What are promotional prices?
Temporarily pricing products below the list price and sometimes even below cost to increase short-run sales.
What is geographical pricing?
Setting prices for customers located in different parts of the country or the world
What is dynamic pricing?
Adjusting prices continually to meet the characteristics and needs of individual customers and situations.
