Chapter 11: Pricing

Question 0

Customer Value-Based Pricing

Answer 0

Setting price based on buyers’ perceptions of value rather than on the seller’s cost.

Question 1

Price

Answer 1

The amount of money charged for a product or service; the sum of all values that customers exchange for the benefits of having or using the product or service.

Question 2

Good-Value Pricing

Answer 2

Offering the right combination of quality and good service at a fair price.

Question 3

Value-Added Pricing

Answer 3

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

Question 4

Cost-Based Pricing

Answer 4

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

Question 5

Fixed Costs (Overhead)

Answer 5

Costs that do not vary with production or sales level.

Question 6

Variable Costs

Answer 6

Costs that vary directly with the level of production

Question 7

Total Costs

Answer 7

The sum of the fixed and variable costs for any given level of production.

Question 8

Experiance Curve (Learning Curve)

Answer 8

The drop in the average per-unit production cost that comes with accumulated production experience.

Question 9

Cost-Plus Pricing (Markup Pricing)

Answer 9

Adding a standard markup to the cost of the product.

Question 10

Break-Even Pricing (Target Return Pricing)

Answer 10

Setting price to break even on the costs of making and marketing a product or setting price to make a target return.

Question 11

Competitive-Based Pricing

Answer 11

Setting prices based on competitors strategies, costs, prices, and market offerings.

Question 12

Target Costing

Answer 12

Pricing that starts with an ideal selling price and then targets costs that will ensure that the price is met.

Question 13

Demand Curve

Answer 13

A curve that shows the number of units a market will buy in a given time period at different prices that might be charged.

Question 14

Price Elasticity

Answer 14

A measure of the sensitivity of demand to changes in price.

Question 15

Market-Skimming Pricing (Price Skimming)

Answer 15

Setting a high price for a new product to skim maximum revenues layer by layer from the segments willing to pay the high price; the company makes fewer but more profitable sales.

Question 16

Market-Penetration Pricing

Answer 16

Setting a low price for a new product to attract a large number of buyers and a large market share.

Question 17

Product Line Pricing

Answer 17

Setting the price steps between various products in a product line based on cost differences between the products, customer evaluations of different features, and competitors’ prices.

Question 18

Optional Product Pricing

Answer 18

The pricing of optional or accessory products along with a main product

Question 19

Captive Product Pricing

Answer 19

Setting a price for products that must be used along with a main product, such as blades for a razor and games for a console.

Question 20

By-Product Pricing

Answer 20

Setting a price for by-products to make a main products price more competitive.

Question 21

Product Bundle Pricing

Answer 21

Combining several products and offering the bundle at a reduced price.

Question 22

Discount

Answer 22

A straight reduction in price on purchases during a stated period of time or of larger quantities.

Question 23

Allowence

Answer 23

Promotional money paid by manufacturers to retailers in return for an agreement to feature the manufacturer’s products in some way.

Question 24

Segmented Pricing

Answer 24

Selling a product or service at two or more prices, where the difference in prices is not based on differences in costs.

Question 25

Psychological Pricing

Answer 25

Pricing that considers the psychology of prices, not simply the economics, the price says something about the product.

Question 26

Reference Prices

Answer 26

Prices that buyers carry in their minds and refer to when they look at a given product.

Question 27

Promotional Pricing

Answer 27

Temporarily pricing products below the list price, and sometimes even below the cost, to increase short-run sales.

Question 28

Geographical Pricing

Answer 28

Setting prices for customers located in different parts of the country or world.

Question 29

FOB-Origin Pricing

Answer 29

A geographical pricing strategy in which goods are placed free on board a carrier; the customer pays the freight from the factory to the destination.

Question 30

Uniform-Delivered Pricing

Answer 30

A geographical pricing strategy in which the company charges the same price plus freight to all customers regardless of their location.

Question 31

Zone Pricing

Answer 31

A geographical pricing strategy in which the company sets up two or more zones. All customers within a zone pay the same total price; the more distant the zone, the higher the price.

Question 32

Dynamic Pricing

Answer 32

Adjusting prices continually to meet the characteristics of individual customers and situations.