Chapter 9: Pricing Flashcards
What is the price?
Price is the amount of money charged in exchange for a good or service.
What are two unique attributes of price?
It produces market share and profitability along with it being the only element of the marketing mix that produces revenue.
What are the two parameters that the price must be within?
The Price floor, which is the cost to make the product and the desired minimum profit, and the ceiling is the maximum price that consumers will pay for a product.
What is customer value-based pricing?
It is where consumer perception sets the parameters of what the price of a product is in each market, and the target price is set on that perception.
What is good-value pricing?
It is the desire to offer customers just the right amount of value for the right price. Usually involves more quality for the same or the same quality for less.
What is value-added pricing?
It is the addition of more features as a reason to increase prices for products that otherwise aren’t profitable.
What is cost-based pricing?
It is assessing the production and distribution costs and then adding a predetermined target profit in order to determine the product’s price. It can be either low or high.
What are the types of costs, and what are they together?
The two types of costs are fixed and variable. Fixed are the same regardless of the number of units, whereas variables are dependent on the number of units. Together, they’re total costs.
What is cost-plus/markup pricing?
That is when a set markup is added to the cost to produce an item regardless of demand.
What is break-even/target return pricing?
It is where prices are set based on the demand that the product will get, as laid out in the demand curve.
What is competition-based pricing?
It is pricing based on the price, costs, and market offerings of the competition.
What are additional internal and external factors that must be considered when evaluating price?
Internal factors are organizational structure and overall marketing strategy. External factors are the market, the economy, and impacts on other organizations.
What is target costing?
It is having a set price in mind before the product is made so that it can satisfy a target market.
What is non-price targeting?
It is companies trying to position themselves in the market so that there is a perceived value of their product regardless of price.
Who decides prices in large and small organizations?
In small, it’s top-level executives, in large companies, it’s the project and middle managers.
What is a pure competition market?
For many sellers and buyers of a commodity, no entity has many effects on the price.
What is a monopolistic market?
It is where there are many buyers and sellers, though there are many prices due to there being multiple segments due to customer differences.
What is an oligopolistic market?
It is where the market is dominated by a few industry giants, companies are well aware of one another and position themselves in response to the others.
What is a true monopoly?
It is where there is one dominant player that controls all pricing.
What is the relationship described by the demand curve?
Price and quantity sold. Inversely related.
What is price elasticity, and what are the two types?
Price elasticity is how much demand changes when price changes. Inelastic is when a small change in price has little or no effect on demand, whereas elastic demand is heavily determined by the price.
What are the economic factors that affect the price?
Those are interest rates, booms and recessions, and inflation.
