Chapter 12 Setting The Right Price

Question 1

revenue

Answer 1

price x quantity

Question 2

profit

Answer 2

profit = revenue - expenses

Question 3

return on investment (ROI)

Answer 3

Return on investment or return on costs is a ratio between net income and investment

formula:
net income/cost of investment

Question 4

market share

Answer 4

a company’s product sales as a percentage of total sales in that industry

Question 5

status quo pricing

Answer 5

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

Question 6

demand

Answer 6

consumer’s desire and willingness to buy a product or service at a given period or over time.

Question 7

price sensitivity

Answer 7

consumers varying level of desire to buy a given product at different price levels

Question 8

price elasticity of demand

Answer 8

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

Question 9

break-even analysis

Answer 9

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

Question 10

price strategy

Answer 10

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

Question 11

price skimming

Answer 11

a high introductory price, often coupled with heavy promotion

Question 12

penetration pricing

Answer 12

a relatively low price for a product initially as a way to reach the mass market

Question 13

base price

Answer 13

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

Question 14

quantity discount

Answer 14

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

Question 15

cumulative quantity discount

Answer 15

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

Question 16

noncumulative quantity discount

Answer 16

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

Question 17

cash discount

Answer 17

a price reduction offered to a consumer, an industrial use, or a marketing intermediary in return for prompt payment of a bill

Question 18

functional discount (trade discount)

Answer 18

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

Question 19

seasonal discount

Answer 19

a price reduction for buying merchandise out of season

Question 20

value-based pricing

Answer 20

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

Question 21

dynamic pricing

Answer 21

is the ability to change prices very quickly, often in real time

Question 22

single-price tactic

Answer 22

offering all goods and services at the same price (or perhaps two or three prices)

Question 23

flexible pricing (variable pricing)

Answer 23

different customers pay different prices for essentially the merchandise bought in equal quantities

different customers get different prices

Question 24

professional services pricing

Answer 24

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

Question 25

price lining

Answer 25

offering a product line with several items at specific price points

Question 26

loss-leader pricing

Answer 26

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

Question 27

odd-even pricing (psychological pricing)

Answer 27

odd-numbered pricing connotes bargains, and even-numbered implies quality

Question 28

price bundling

Answer 28

marketing two or more products in a single package for a special price

Question 29

unbundling

Answer 29

reducing the bundle of services that comes with the basic product

Question 30

two-part pricing

Answer 30

charging two separate amounts to consume a single good or service

Question 31

pay what you want pricing

Answer 31

allows the customer to choose the amount they want to pay for a good to service

Question 32

bait pricing

Answer 32

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

Question 33

deceptive pricing

Answer 33

promoting a price or price saving that is not actually available

Question 34

price fixing

Answer 34

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

Question 35

predatory pricing

Answer 35

the practice of charging a very low price for a product with the intent of driving competitors out of the market or the business

Question 36

resale price maintenance

Answer 36

attempts by a producer to control the price of their products in retail stores