Chapter 11 Vocab

Question 1

market skimming pricing (price skimming)

Answer 1

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 2

market penetration pricing

Answer 2

setting a low price for a new product in order to attract a large number of buyers and large market share

Question 3

product line pricing

Answer 3

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 4

optional product pricing

Answer 4

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

Question 5

captive product pricing

Answer 5

setting a price for products that must be used along with a main product, such as blades for a razor or video games for a console

Question 6

by product pricing

Answer 6

setting a price for by products in order to make the main product’s price more competitive

Question 7

product bundle pricing

Answer 7

combining several products and offering the bundle at a reduced price

Question 8

discount

Answer 8

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

Question 9

allowance

Answer 9

promotional money paid by manufacturers to retailers in return for an arrangement to feature the manufacturer’s products in some way

Question 10

segmented pricing

Answer 10

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

Question 11

psychological pricing

Answer 11

pricing that considers the psychology of prices and not simply the economics; the price is used to say something about the product

Question 12

reference prices

Answer 12

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

Question 13

promotional pricing

Answer 13

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

Question 14

geographical pricing

Answer 14

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

Question 15

FOB origin pricing

Answer 15

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 16

uniform delivered pricing

Answer 16

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

Question 17

zone pricing

Answer 17

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

Question 18

basing point pricing

Answer 18

a geographical pricing strategy in which the seller designates some city as a basing point and charges all customers the freight cost from that city to the customer

Question 19

freight absorption system

Answer 19

a geographical pricing strategy in which the seller absorbs all or part of the freight charges in order to get the desired business

Question 20

dynamic pricing

Answer 20

adjusting prices continually to meet the characteristics and needs of individual customers and situations