Chapter 14 Flashcards
supply
the amounts of a product that will be offered for sale at different prices during a specified period
Generally, the higher the price, the more supply.
demand
the amounts of a product that consumers will purchase at different prices during a specified time period
As the price goes down, demand goes up.
Market equilibrium
Suppliers make just enough product and price it in such a way that consumers buy it all.
elasticity
the measure of the responsiveness of purchasers and suppliers to price changes
elasticity of demand
the percentage change in the quantity of a product demanded divided by the percentage change in its price
Benefit/Limitation of Jury of Executive Opinion
Opinions from executives are cheap and inexpensive and can come from many different departments. BUT Managers may lack background knowledge and experience to make meaningful predictions
*Qualitative Method
Benefit/Limitation of Delphi technique
A group of experts may predict long-term events such as technological breakthroughs. BUT Time-consuming,
Expensive.
*Qualitative Method
Benefit/Limitation Sales force composite
Useful in predicting short-term and intermediate sales for firms that serve selected customers. BUT Intentions to buy may not result in actual purchases. Time-consuming,
Expensive.
*Qualitative Method
Benefit/Limitation of the Test market
It provides realistic information on actual purchases rather than on intent to buy. BUT, Alerts competition to new product plans. Time-consuming and Expensive.
*Quantitative Method
Benefit/Limitation of Trend analysis
Quick, Inexpensive, Effective with stable customer demand and environment. BUT, Assumes the future will continue the past Ignores possible changes in the marketing environment.
*Quantitative Method
Three pricing Strategies
Skimming
Penetration
Competitive pricing
skimming pricing strategies
intentionally setting a relatively high price compared with the prices of competing products.
Also known as market-plus pricing
Commonly used as a market-entry price for distinctive goods or services with little or no initial competition
When supply begins to exceed demand or competition catches up, the initial high price is dropped.
penetration pricing strategy
setting a lower price than competitive offerings in order to stimulate demand and market acceptance.
Also known as market-minus pricing
Once the product achieves some recognition, marketers may increase the price to the level of competing products.
competitive pricing strategy
pricing strategy designed to reduce the emphasis on price as a competitive variable by matching competitors’ prices and focusing on other ways to differentiate products
Pricing Tactics
Psychological pricing
Product-line pricing
Promotional pricing
Psychological Pricing
pricing tactic based on the belief that certain prices or price ranges make products more appealing to buyers
product line pricing
pricing tactic where the firm sets a limited number of prices for a selection of merchandise
promotional pricing
pricing tactic in which a lower-than-normal price is used as a temporary ingredient in a firm’s marketing strategy
Customers may get hooked on sales and other promotional pricing events.
Loss leaders
pricing tactic where goods are priced below cost to attract customers to stores in hopes they will buy other merchandise at regular prices.
Robinson-Patman Act
a Depression-era law that prohibits price discrimination when selling the same product in the same amount to two different customers
Rules that price differences must reflect actual cost differences
Prohibits selling at unreasonably low prices to drive competitors out of business
price discrimination
when a supplier offers the same product to two buyers at two different prices
unfair-trade laws
laws which require sellers to maintain minimum prices for comparable merchandise
The goal of these laws is to deter intentional predatory pricing by larger companies.
