Chapter 14 Vocab

Question 1

Above-, At-, or Below-market Pricing

Answer 1

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

Question 2

Basing-point Pricing

Answer 2

Selecting one or more geographical locations (basing point) from which the list price for products plus freight expenses are charged to the buyer.

Question 3

Bundle Pricing

Answer 3

The marketing of two or more products in a single package price.

Question 4

Cost-plus Pricing

Answer 4

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 5

Customary Pricing

Answer 5

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

Question 6

Dynamic Pricing Policy

Answer 6

Setting different prices for products and services in real time in response to supply and demand conditions. Also called a “flexible-price policy”.

Question 7

Everyday Low Pricing(EDLP)

Answer 7

The practice of replacing promotional allowances with lower manufacturer list prices.

Question 8

Experience Curve Pricing

Answer 8

A method of pricing based on the learning effect, which holds that the unit cost of many products and services declines by 10 percent to 30 percent each time a firm’s experience at producing and selling them doubles.

Question 9

Fixed-price Policy

Answer 9

Setting one price for all buyers of a product or service. Also called a “one-price policy”.

Question 10

FOB Origin Policy

Answer 10

The “free on board” (FOB) price the seller quotes that includes only the cost of loading the product onto the vehicle and specifies the name of the location where the loading is to occur (seller’s factory or warehouse).

Question 11

Loss-leader Pricing

Answer 11

Deliberately selling a product below its customary price, not to increase sales, but to attract customers’ attention to it in hopes that they will buy other products with large markups as well.

Question 12

Odd-even Pricing

Answer 12

Setting prices a few dollars or cents under an even number.

Question 13

Penetration Pricing

Answer 13

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

Question 14

Predatory Pricing

Answer 14

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

Question 15

Prestige Pricing

Answer 15

Setting a high price so that quality- or status-conscious consumers will be attracted to the product and buy it.

Question 16

Price Discrimination

Answer 16

The practice of charging different prices to different buyers for products of like grade and quality.

Question 17

Price Fixing

Answer 17

A conspiracy among firms to set prices for a product.

Question 18

Price Lining

Answer 18

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

Question 19

Price War

Answer 19

Successive price cutting by competitors to increase or maintain their unit sales or market share.

Question 20

Product-line Pricing

Answer 20

The setting of prices for all items in a product line to cover the total cost and product a profit for the complete line, not necessarily for each item.

Question 21

Promotional Allowances

Answer 21

Cash payments or an extra amount of “free goods” awarded sellers in the marketing channel for undertaking certain advertising or selling activities to promote a product.

Question 22

Quantity Discounts

Answer 22

Reductions in unit costs for a larger order.

Question 23

Skimming Pricing

Answer 23

Setting the higher initial price that customers really desiring the product are willing to pay when introducing a new or innovative product.

Question 24

Standard Markup Pricing

Answer 24

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

Question 25

Target Pricing

Answer 25

Consists of (1) estimating the price that ultimate consumers would be willing to pay for a product, (2) working backward through markups taken by retailers and wholesalers to determine what price to charge wholesalers, and then (3) deliberately adjusting the composition and features of the product to achieve the target price to consumers.

Question 26

Target Profit Pricing

Answer 26

Setting an annual target of a specific dollar volume of profit.

Question 27

Target Return-on-investment Pricing

Answer 27

Setting a price to achieve an annual target return on investment (ROI).

Question 28

Target Return-on-sales Pricing

Answer 28

Setting a price to achieve a profit that is a specified percentage of the sales volume.

Question 29

Uniform Delivered Pricing

Answer 29

The price the seller quotes that includes all transportation costs.

Question 30

Yield Management Pricing

Answer 30

The charging of different prices to maximize revenue for a set amount of capacity at any given time.