Chapter 12 Setting The Right Price Flashcards
revenue
price x quantity
profit
profit = revenue - expenses
return on investment (ROI)
Return on investment or return on costs is a ratio between net income and investment
formula:
net income/cost of investment
market share
a company’s product sales as a percentage of total sales in that industry
status quo pricing
a pricing objective that maintains existing prices or meets the competition’s pricing
pricing objective that maintains existing price or meets the price of other competitors
demand
consumer’s desire and willingness to buy a product or service at a given period or over time.
price sensitivity
consumers varying level of desire to buy a given product at different price levels
price elasticity of demand
a measurement of change in consumer demand for a product relative to the changes in its price
measurement of change in demand relative to changes in price
break-even analysis
the calculation of the number of units sold or total revenue required, that a company must meet to cover its costs, beyond which profits occur
calculation of the requirements to cover the costs
price strategy
a basic, long-term pricing framework that defines the initial price for a product and the intended direction for price movements over the product life cycle
determining what the price should be and how it should change over time
price skimming
a high introductory price, often coupled with heavy promotion
penetration pricing
a relatively low price for a product initially as a way to reach the mass market
base price
the general price level at which the company expects to sell the good or service
The starting price at which the company expects to sell the good or service
quantity discount
a unit price reduction offered to buyers buying either in multiple units or at more than a specified dollar amount
decreasing the unit price of the product for every additional unit sold
or
cumulative quantity discount
a deduction for the list price that applies to the buyer’s total price made during a specific period
discount that is a deduction from the total list price
noncumulative quantity discount
a deduction from the list price that applies to a single order rather than to the total volume of orders placed during a certain period
deduction from the list price that applies to a single order instead of the total volume of orders placed in a certain time period
cash discount
a price reduction offered to a consumer, an industrial use, or a marketing intermediary in return for prompt payment of a bill
functional discount (trade discount)
a discount to distribution channel intermediaries such as wholesalers and retailers for performing channel functions
reduction in price granted by manufacturers or wholesalers to their resellers
seasonal discount
a price reduction for buying merchandise out of season
value-based pricing
a pricing tactic that sets the price at a level that seems to the customer to be a good value compared with the prices of other options
setting the price of the product lower in comparison to other competitors to provide similar value for a lower price
dynamic pricing
is the ability to change prices very quickly, often in real time
single-price tactic
offering all goods and services at the same price (or perhaps two or three prices)
flexible pricing (variable pricing)
different customers pay different prices for essentially the merchandise bought in equal quantities
different customers get different prices
professional services pricing
used by people with experience, training, and often certification by a licensing board, fees are typically charged at an hourly rate, but may be based on the solution of a problem or performance of an act
fees are charged at an hourly rate due to a individual’s knowledge and professional expertise
price lining
offering a product line with several items at specific price points
loss-leader pricing
a product is sold near or even below cost in the hopes that shoppers will buy that product over other items once they are in the store
a product that is sold near or even below cost in hopes that consumers choose that product over competing products
odd-even pricing (psychological pricing)
odd-numbered pricing connotes bargains, and even-numbered implies quality
price bundling
marketing two or more products in a single package for a special price
unbundling
reducing the bundle of services that comes with the basic product
two-part pricing
charging two separate amounts to consume a single good or service
pay what you want pricing
allows the customer to choose the amount they want to pay for a good to service
bait pricing
a price tactic that tries to get consumers into a store through false or misleading price advertising and then uses high-pressure selling to persuade consumers to buy more expensive merchandise instead
deceptive pricing
promoting a price or price saving that is not actually available
price fixing
an agreement between two or more companies to set the price they will change for a product or service
or
Price fixing is an anti-competitive agreement between participants on the same side in a market to buy or sell a product, service, or commodity only at a fixed price
an anti-competitive agreement amongst competitors in the same market to buy or sell a product only at the set fixed price
predatory pricing
the practice of charging a very low price for a product with the intent of driving competitors out of the market or the business
resale price maintenance
attempts by a producer to control the price of their products in retail stores
