Chapter 14: Price

Question 1

Skimming Pricing

Answer 1

Setting the highest initial price that customers who really desire the product are willing to pay when introducing a new or innovative product

Question 2

Penetration Pricing

Answer 2

The opposite of Skimming Pricing

Setting a low initial price on a new product to appeal immediately to the mass market

Question 3

Prestige Pricing

Answer 3

Setting a high price so that consumers that value quality or status will be attracted to the product

Question 4

Price Lining

Answer 4

Setting the price of a line of products at a number of different specific pricing points

Question 5

Odd-Even Pricing

Answer 5

Setting prices a few dollars or cent under an even number ($189.99)

Question 6

Target Pricing

Answer 6

1. Estimating the price that consumers would be willing to pay
2. Working backward through markups taken by retailers and wholesalers
3. Adjust composition and features of the product to achieve the target price to consumers

Question 7

Bundle Pricing

Answer 7

Marketing of two or more products in a single package price

Question 8

Yield Management Pricing

Answer 8

Changing of different prices to maximize revenue for a set amount of capacity at any given time

Question 9

Standard Markup Pricing

Answer 9

Adding a fixed percentage to the cost of all items in a specific product class

Question 10

Cost-plus Pricing

Answer 10

Summing the total unit cost of providing a product or service and adding a specific amount to the cost to arrive at a price

Question 11

Target Profit Pricing

Answer 11

Setting an annual target of a specific dollar volume of profit

Question 12

Customary Pricing

Answer 12

Setting a price that is dictated by tradition, a standardized channel of distribution, or other competitive factors

Question 13

Above-,At, or Below-Market Pricing

Answer 13

Setting a price based on a subjective feel for the competitors’ price or market price as the benchmark

Question 14

Loss-leader Pricing

Answer 14

Selling a product below its customary price to attract customers’ attention in hopes they will buy other products as well

Question 15

Fixed-Price Policy

Answer 15

Also called One-Price Policy

Setting on price for all buyers of a product or service

Question 16

Dynamic Pricing Policy

Answer 16

Also called a Flexible Price Policy

Setting different prices for products and services in real time in response to supply and demand conditions

Question 17

Quantity Discounts

Answer 17

Reduction in unit costs for a large order (Cumulative and Noncumulative)

Question 18

FOB Origin Pricing

Answer 18

Free on Board

Includes only the cost of loading the product onto the vehicle and specifies the name of the location where the loading is to occur

Question 19

Uniform Delivered Pricing

Answer 19

Includes all transportation costs

Question 20

Price Fixing

Answer 20

A conspiracy among firms to set prices for a product

Question 21

Price Discrimination

Answer 21

Charging different prices to different buyers for products of like grade and quality

Question 22

Deceptive Pricing

Answer 22

Bait-and-Switch

The practice of misleading consumers with price deals

Question 23

Predatory Pricing

Answer 23

Charging a very low price for a product with the intent of driving competitors out of business