Chapter 10 Terms Flashcards
Price
The assignment of value, or the amount the consumer must exchange to receive the offering
Market Share
The percentage of a market (defined in terms of either sales units or revenue) accounted for by a specific firm, product lines, or brands
Prestige Products
Products that have a high price and that appeal to status-conscious consumers
Price Elasticity of Demand
The percentage change in unit sales that results from a percentage change in price
Elastic Demand
Demand in which changes in price have large effects on the amount demanded
Inelastic Demand
Demand in which changes in price have little or no effect on the amount demanded
Variable Costs
The costs of production (raw and processed materials, parts, and labor) that are tied to and vary, depending on the number of units produced
Fixed Costs
Costs of production that do not change with the number of units produced
Total Costs
The total of the fixed costs and the variable costs for a set number of units produced
Break-even Analysis
A method for determining the number of units that a firm must produce and sell at a given price to cover all its costs
Break-even Point
The point at which the total revenue and total costs are equal and beyond which the company makes a profit; below that point, the firm will suffer a loss
Markup
An amount added to the cost of a product to create the price at which a channel member will sell the product
Gross Margin
The markup amount added to the cost of a product to cover the fixed costs of the retailer or wholesaler and leave an amount for a profit.
List Price/Manufacturer’s Suggested Retail Price (MSRP)
The price that the manufacturer sets as the appropriate price for the end consumer to pay
Cost-Plus Pricing
A method of setting prices in which the seller totals all the costs for the product and then adds an amount to arrive at the selling price
Keystoning
Retail pricing strategy in which the retailer doubles the cost of the item (100 percent markup) to determine the price
Demand-Based Pricing
A price-setting method based on estimates of demand at different prices
Target Costing
A process in which firms identify the quality and functionality needed to satisfy customers and what price they are willing to pay before the product is designed; the product is manufactured only if the firm can control costs to meet the required price
Yield Management Pricing
A practice of charging different prices to different customers to manage capacity while maximizing revenues
Price Leadership
A pricing strategy in which one firm first sets its price and other firms in the industry follow with the same or similar prices
Everyday Low Pricing (EDLP)/Value Pricing
A pricing strategy in which a firm sets prices that provide ultimate value to customers
High/Low Pricing
A retail pricing strategy in which the retailer prices merchandise at list price but runs frequent, often weekly, promotions that heavily discount some products
Skimming Price
A very high, premium price that a firm charges for its new, highly desirable product
Penetration Pricing
A pricing strategy in which a firm introduces a new product at a very low price to encourage more customers to purchase it
Price Segmentation
The practice of charging different prices to different market segments for the same product
Peak Load Pricing
A pricing plan that sets prices higher during periods with higher demand
Surge Pricing
A pricing plan that raises prices of a product as demand goes up and lowers it as demand slides
Bottom-of-the-Pyramid Pricing
Innovative pricing that will appeal to consumers with the lowest incomes by brands that wish to get a foothold in bottom of the pyramid countries
Two-Part Pricing
Pricing that requires two separate types of payments to purchase the product
Payment Pricing
A pricing tactic that breaks up the total price into smaller amounts payable over time
Decoy Pricing
A pricing strategy where a seller offers at least three similar products; two have comparable but more expensive prices and one of these two is less attractive to buyers, thus causing more buyers to buy the higher priced more attractive item
Price Bundling
Selling two or more goods or services as a single package for one price
Captive Pricing
A pricing tactic for two items that must be used together; one item is priced very low, and the firm makes its profit on another, high-margin item essential to the operation of the first item
By-Product Pricing
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FOB Origin Pricing
A pricing tactic in which the cost of transporting the product from the factory to the customer’s location is the responsibility of the customer
FOB Delivered Pricing
A pricing tactic in which the cost of loading and transporting the product to the customer is included in the selling price and is paid by the manufacturer
Uniform Delivered Pricing
A pricing tactic in which a firm adds a standard shipping charge to the price for all customers regardless of location
Freight Absorption Pricing
A pricing tactic in which the seller absorbs the total cost of transportation
Trade Discounts
Discounts off list price of products to members of the channel of distribution who perform various marketing functions
Quantity Discounts
A pricing tactic of charging reduced prices for purchases of larger quantities of a product
Cash Discounts
A discount offered to a customer to entice them to pay their bill quickly
Seasonal Discounts
Price reductions offered only during certain times of the year
Dynamic Pricing
A pricing strategy in which the price can easily be adjusted to meet changes in the marketplace
Online Lining
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Freemium Pricing
A business strategy in which a product in its most basic version is provided free of charge but the company charges money (the premium) for upgraded versions of the product with more features, greater functionality, or greater capacity
Internal Reference Price
A set price or a price range in consumers’ minds that they refer to in evaluating a product’s price
Price Lining
The practice of setting a limited number of different specific prices, called price points, for items in a product line
Prestige Pricing
A pricing strategy used by luxury goods marketers in which they keep the price artificially high to maintain a favorable image of the product
Bait-and-Switch
An illegal marketing practice in which an advertised price special is used as bait to get customers into the store with the intention of switching them to a higher-priced item
Loss-Leader Pricing
The pricing policy of setting prices very low or even below cost to attract customers into a store
Unfair Sales Activities
State laws that prohibit suppliers from selling products below cost to protect small businesses from larger competitors
Price-Fixing
The collaboration of two or more firms in setting prices, usually to keep prices high
Predatory Pricing
An illegal pricing strategy in which a company sets a very low price for the purpose of driving competitors out of business
Segmented Pricing
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