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Mark 201 > Chapter 9 > Flashcards

Chapter 9 Flashcards

1
Q

Define barter

A

The practice of exchanging products and services for other products and services rather than for money.

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2
Q

What is the price equation

A

This shows the different factors that increase or decrease the price

Price = list price - (incentives and allowances) + (Extra fees)

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3
Q

From a consumers standpoint what does price often indicate

A

it indicates value when it is compared to the perceived benefits of a product or service, such as quality, durability, and so on

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4
Q

Define value

A

The ratio of perceived benefits to price

(perceived benefits/price)

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5
Q

What is the practice of value pricing

A

Increasing product or service benefits while maintaining or decreasing price

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6
Q

Define the profit equation

A

Profit = total revenue – total cost.
= (Unit price x Quantity sold) - Total cost

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7
Q

When setting a final price for a product, a marketing manager needs to find an approximate price level to use as a reasonable starting point, what are the 4 common approaches to helping find this approx. price level

A
  1. demand oriented (emphasize factors underlying expected customer tastes and preferences)
  2. cost oriented (price is more affected by the cost side)
  3. profit oriented (setting price with a profit target)
  4. competition oriented (approach based on an analysis of what competitors are doing)
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8
Q

Describe the demand orientated approach of skimming pricing

A

Setting the highest initial price that customers really desiring the product are willing to pay when introducing a new or innovative product. Then as the demand of these customers is satisfied, the firm lowers the price to attract a more price sensitive agreement

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9
Q

Describe the demand orientated approach of penetration pricing

A

Setting a low initial price on a new product to appeal immediately to the mass market. –> used when consumers are price sensitive

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10
Q

Describe the demand orientated approach of prestige pricing

A

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

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11
Q

Describe the demand orientated approach of price lining

A

often when a firm is selling not just a single product but a line of products they may sell them at a number of different specific price points (ex. the ipad being sold at different prices)

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12
Q

Describe the demand orientated approach of odd-even pricing

A

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

ex. $649 instead of $650

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13
Q

Describe the demand orientated approach of target pricing

A

Manufacturers will sometimes estimate the price that the ultimate consumer would be willing to pay for a product, they then work backwards through markups taken by retailers and wholesalers to determine what price they can charge for the product –> manufacturers deliberately adjust the composition and features of a product to achieve the target price to consumers

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14
Q

Describe the demand orientated approach of bundle pricing

A

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

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15
Q

Describe the demand orientated approach of yield management pricing

A

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

ex. ordering uber at different times of days, paying differently for seats beside each other on planes

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16
Q

Cost oriented approaches to pricing include what two types

A
  1. standard markup pricing
  2. cost plus pricing
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17
Q

Describe standard markup pricing

A

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

(firms sell their products at a price that exceeds their costs of production)

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18
Q

How do manufacturers express markup

A

As a percentage of cost (standard markup pricing)

–> (selling price-cost)/cost

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19
Q

how do Parties who buy and resell products (like wholesalers and retailers) express markup

A

As a percentage of price

–>(selling price-cost)/selling price

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20
Q

Describe cost plus pricing

A

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

  • commonly used method to set prices for business products
  • basically paying a fee based on the cost of the work plus some agreed on profit
21
Q

What are the three methods of profit oriented approaches

A
  1. target profit pricing
  2. target return on sales pricing
  3. target return on investment pricing
22
Q

Describe target profit pricing

A

Setting an annual target of a specific dollar volume of profit (this depends on accurate estimate of demand)

23
Q

Describe target return on sales pricing

A

Setting a price to achieve a profit that is a specified percentage of the sales volume.
- supermarkets will use this
- this is often used because of the difficulty in establishing a benchmark of sales or investment to show how much of a firms effort is needed to achieve the target

24
Q

Describe target return on investment pricing

A

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

25
Q

What are the 3 competition oriented approaches

A
  1. Customary pricing
    2.above-, at-, or below-market pricing
    3.loss-leader pricing
26
Q

Describe customary pricing

A

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

27
Q

Describe above-, at-, or below-market pricing

A

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

(the market price of a product is what customers are generally willing to pay, not necessarily the price that the firm sets, marketers may deliberately choose above, at, or below market price then)

28
Q

Describe loss-leader pricing

A

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

29
Q

What’s a downside to loss-leader pricing

A
  • cherry picking –> some consumers move store to store making purchases only on those products that are loss leaders
30
Q

What are the 4 broad methods used for forecasting

A
  1. qualitative methods - involve market experts coming to consensus using nonquantitative means to achieve projections
  2. regression methods - link the forecast to a number of other variables through an equation
  3. multiple equations related to one another
  4. time series methods - assume the variable being forecast is affected by time
31
Q

What is the return on investment (ROI) formula

A

= (Gain attributable to investment - cost of investment)/ cost of investment

32
Q

For the demand curve, along with price what other three key factors are emphasized (demand factors)

A
  1. consumer tastes
  2. price and availability of similar products
    3.consumer income
33
Q

Define total cost

A

Total expenses incurred by a firm in producing and marketing a product; total cost is the sum of fixed cost and variable costs.

34
Q

Define fixed cost

A

Firm’s expenses that are stable and do not change with the quantity of product that is produced and sold.

35
Q

Define variable cost

A

Sum of the expenses of the firm that vary directly with the quantity of products that is produced and sold.

36
Q

define break-even analysis

A

Examines the relationship between total revenue and total cost to determine profitability at different levels of output.

37
Q

What is the break even point

A

This is the quantity at which total revenue and total cost are equal. Profit comes from any units sold after the break even point is reached

38
Q

How do you calculate the break even point

A

BEP quantity = fixed cost/(unit price-variable cost)

39
Q

break even analysis is used to study what

A

the impact on profit of changes in price, fixed cost, and variable cost

40
Q

Define pricing objectives

A

Expectations that specify the role of price in an organization’s marketing and strategic plans.

  • these cane relate to profit, sales, market share, volume, survival, social responsibility
41
Q

What are the 3 different objectives related to a firms profit which is often measured in terms of ROI

A
  1. managing for long run profits - company gives up immediate profit in exchange for achieving a higher market share
  2. maximizing current profit
  3. target return - occurs when a firm sets its price to achieve a profit goal
42
Q

Define pricing constraints

A

Factors that limit the range of prices a firm may set.

  • includes demand for the product class, product, brand
  • newness of the product: stage in the product life cycle
  • cost of producing and marketing the product
  • competitors prices
43
Q

market leader vs. market follower

A
  • charging prices in line with the competition is being a market follower
  • making decisions to either lower or higher the price to get pricing objectives is being a market leader
44
Q

What are the considerations for legal and ethical

A
  1. price fixing - competition act prohibits this
  2. price discrimination - different prices charged to different customers, not just one time or occassional event
  3. deceptive pricing
45
Q

What are some deceptive pricing practices

A
  1. bait and switch - firm offer low price for a product and when consumers some to purchase it they are persuaded to buy a more expensive product
  2. bargains and conditional on other purchases - buy one get on free, if the first item is sold at the regular price it is legal, if that price is inflated then it is not
  3. price comparisons - advertising below manufacturers price but no one is charging that manufacturers price
  4. double ticketing - more than one price tag is placed on an item, it must be sold at the lower price
  5. predatory pricing - charging a very low price with the intent of undercutting competitors and driving them out of business, after they have been driven out the offending firm raises prices
46
Q

Define dumping

A

Occurs when a firm sells a product in a foreign country below its domestic prices or below its actual cost.

47
Q

what are the steps to setting a price

A
  1. select an approximate price level
    2.set the list or quoted price (either use the one price or flexible price policy)
  2. make special adjustments to the list or quoted price (give discounts, allowances, or geographical adjustments)
  3. monitor and adjust the prices
47
Q

Define a grey market

A

Situations where products are sold through unauthorized channels of distribution. Also known as parallel importing.

48
Q

What are the 4 kinds of discounts

A
  1. quantity discounts
  2. seasonal discounts
  3. trade/functional discounts
  4. cash discounts

Mark 201 (7 decks)

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