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ADM 2320 > Chapter 11 > Flashcards

Chapter 11 Flashcards

1
Q

Five Cs of Pricing

A 
Competition
Costs
Company Objectives
Customers
Channel Members
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2
Q

Profit Orientation

A

A company objective that can be implemented by focusing on target profit pricing, maximizing profits or target return pricing

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3
Q

Target Profit Pricing

A

A pricing strategy implemented by firms when they have a particular profit goal as their overriding concern; uses price to stimulate a certain level of sales at a certain profit per unit

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4
Q

Maximizing Profits Strategy

A

A mathematical model that captures all the factors required to explain and predict sales and profits, which should be able to identify the price at which its products are maximized

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5
Q

Target Return Pricing

A

A pricing strategy implemented by firms less concerned with the absolute level of profits and more interested in the rate at which their profits are generated relative to their investments; designed to produce a specific return on investment, usually expressed as a percentage of sales

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6
Q

Sales Orientation

A

A company objective based on the belied that increasing sales will help the firm more than will increasing profits

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7
Q

Competitor Orientation

A

A company objective based on the premise that the firm should measure itself primarily against its competition

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8
Q

Competitive Parity

A

A firm’s strategy of setting prices that are similar to those of major competitors

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9
Q

Customer Orientation

A

Pricing orientation that explicitly invokes the concept of customer value and setting prices to match consumer expectations

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10
Q

Demand Curve

A

Shows how many units consumers will demand during a specific time period at different prices

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11
Q

Prestige products/services

A

those that consumers purchase for status rather than functionality

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12
Q

Price elasticity of demand

A

Measures how changes in price affect the quantity demanded

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13
Q

Elastic

A

Refers to a market for a product/service that is price sensitive. Meaning small changes in price will generate fairly large changes in the quantity demanded

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14
Q

Inelastic

A

Refers to a market for a product/service that is price insensitive. Meaning small Meaning small changes in price will not generate fairly large changes in the quantity demanded

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15
Q

Income Effect

A

Refers to the change in the quantity demanded because of a change in their income

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16
Q

Substitution Effect

A

Refers to consumers’ ability to substitute other products for the focal brand, increasing the price elasticity of demand for the focal brand

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17
Q

Cross-price Elasticity

A

% Change in Demand for Product A that occurs in response to % Change in Price of Product B

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18
Q

Complementary Products

A

Products whose demand curves are positively related, they rise or fall together

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19
Q

Substitute Products

A

Products for which changes in demand are negatively related, Product A increases, Product B will decrease

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20
Q

Variable Costs

A

vary with product volume

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21
Q

Fixed Costs

A

costs that remain the same, regardless of product volume

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22
Q

Total cost

A

Variable Costs + Fixed Costs

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23
Q

Break-even point

A 
Revenue = Total Costs
Profits = 0
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24
Q

Contribution per unit formula

A

= Price - Variable cost per unit

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25
Q

Break-even point formula

A

= Fixed Costs / Contribution per unit

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26
Q

Monopoly

A

Only 1 firm provides the product/service in a particular industry

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27
Q

Oligopoly

A

A few firms dominate the market

28
Q

Price War

A

2 or more firms compete by lowering prices

29
Q

Monopolistic Competition

A

When many firms sell closely related but not homogeneous products; these products may be viewed as substitutes but are not perfect substitutes

30
Q

Pure Competition

A

When different companies sell commodity products that consumers perceive as substitutable

31
Q

Grey market

A

goods have been manufactured by or with the consent of the brand owner but are sold outside of the brand owner’s approved distribution channels

32
Q

Cost-based pricing method

A

determines final price to charge by starting with the cost, without recognizing the role that consumers or competitors’ prices play in the marketplace

33
Q

Competitor-based pricing method

A

how the firm wants consumers to interpret its products relative to the competitor’s offerings

34
Q

Value-based pricing method

A

focuses on overall value of the product offering as perceived consumers. Value is determined by comparing benefits and sacrifices of the product

35
Q

Improvement Value

A

Represents an estimate of how much more (or less) consumers are willing to pay for a product relative to other comparable products

36
Q

Cost of Ownership Method

A

A value-based method for setting prices that determines the total cost of owning the product over its useful life

37
Q

Everyday Low Pricing (EDLP)

A

A strategy companies use to emphasize the continuity of their retail prices at a level somewhere between the regular non-sale price and the deep-discount sale prices their competitors may offer

38
Q

High/Low Pricing

A

A pricing strategy that relies on the promotion of sales, during which prices are temporarily reduced to encourage purchases

39
Q

Price Skimming

A

A strategy o selling a new product or service at a high price that innovators and early adopters are willing to pay to obtain it; after the high price market segment becomes saturated and sales begin to slow down, the firm generally lowers the price to capture (or skim) the new most price-sensitive segment

40
Q

Market Penetration Pricing

A

A pricing strategy of setting the initial price low for the introduction of the new product/service, with the objective of building sales, market share, and profits quickly

41
Q

Experience Curve Effect

A

Refers to the drop in unit cost as the accumulated volume sold increases; as sales continue to grow, the costs continue to drop, allowing even further reductions in the price

42
Q

Reference Price

A

The price against which buyers compare the actual selling price of the product and that facilitates their evaluation process

43
Q

Pricing Tactics

A

Short-term methods, used to focus on company objectives, customers, costs, competition, or channel members; can be responses to competitive threats

44
Q

Price Lining

A

Consumer market pricing tactic of establishing a price floor and a price ceiling for an entire line of similar products and then setting a few other price points in between to represent distinct differences in quality

45
Q

Price Bundling

A

Consumer pricing tactic of selling more than 1 product for a single, lower price than the items would cost sold separately; can be used to sell slow-moving items, to encourage customers to stock up, to encourage trial of a new product or provide incentive to purchase a less desirable product/service

46
Q

Leader Pricing

A

Consumer pricing tactic that attempts to build store traffic by aggressively pricing and advertising a regularly purchased item, often priced at or just above the store’s cost

47
Q

Markdowns

A

Reductions retailers take on the initial selling price of the product/service

48
Q

Size Discount

A

The most common implementation of a quantity discount at the consumer level (larger the quantity, the less the cost per unit)

49
Q

Coupon

A

Provides a stated discount to consumers on the final selling price, the RETAILER handles the discount

50
Q

Rebate

A

Provides a stated discount to consumers on the final selling price, the MANUFACTURER handles the discount

51
Q

Seasonal Discount

A

Pricing tactic of offering an additional reduction as an incentive to retailers to order merchandise in advance of the normal buying season

52
Q

Cash Discount

A

Tactic of offering a reduction in the invoice cost if the buyer pays the invoice prior to the end of the discount period

53
Q

Advertising Allowance

A

Tactic of offering a price reduction to channel members if they agree to feature the manufacturer’s product in their advertising and promotional efforts

54
Q

Listing Allowance

A

Fees paid to retailers simply to get new products into stores or to gain more/better shelf space for their products

55
Q

Quantity Discount

A

Pricing tactic of offering a reduced price according to the amount purchased

56
Q

Cumulative Quantity Discount

A

Pricing tactic of offering a reduced price based on the amount purchased over a specified period

57
Q

Noncumulative Quantity Discount

A

Pricing tactic of offering a reduced price based on only the amount purchased in a single order

58
Q

Uniform Delivered Pricing

A

The shipper charges one rate, no matter where the buyer is located

59
Q

Geographic Pricing

A

The setting of different prices depending on a geographical division of the delivery areas

60
Q

Loss Leader Pricing

A

Lowering price below the store’s cost

61
Q

Bait and Switch

A

Luring customers into the store with a very low advertised price item (bait) only to pressure them to buy a higher-priced item (switch)

62
Q

Predatory Pricing

A

Setting a very low price for 1 or more its products with the intent of driving its competition out of business (illegal)

63
Q

Price Discrimination

A

Selling the same product to different resellers or the consumer at different prices

64
Q

Price Fixing

A

Colluding with other firms to control prices

65
Q

Horizontal Price Fixing

A

When competitors that produce/sell competing products work together to control prices, taking price out of the decision process for consumers

66
Q

Vertical Price Fixing

A

Parties at different levels of the same marketing channel (manufacturers and retailers) collude to control prices passed on to consumers

67
Q

Manufacturer’s Suggested Retail Price (MSRP)

A

Manufacturers encourage retailers to sell their merchandise at a specific price

ADM 2320 (16 decks)

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