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.
How did the Great Recession change consumer habits?
Price cuts, more affordable items, redefined value proposition.
What are the other factors that affect the price?
Resellers, governments, and social causes.
What is market-skimming pricing?
It is the practice of initially listing prices high for new models, and then marking them down once the initial revenue bump has been exhausted.
What is market penetration pricing?
It is the practice of initially having low prices to gain a large market share, and then
What is product line pricing?
It is determining the price steps between products based on product features, customer evaluations, and competitor prices.
What is option product pricing?
It is pricing the main product with a feature or accessory product.
What is captive-product pricing?
It is pricing accessory products that must be used with the main product.
What is By-product pricing?
It is setting a price for by-products in order to offset the price for the main product.
What is product-bundle pricing?
It is setting up the main product with additional products at a reduced price.
What is a discount?
A discount is a straight reduction of the price of goods for a temporary period of time in exchange for a certain quantity of purchase.
What is an allowance?
An allowance is money paid to a retailer by a manufacturer in exchange for the retailer promoting the manufacturer’s product in some way.
What is segmented pricing?
Segmented pricing is charging two or more prices for the same product for reasons that are not the cost to make the product.
What is customer-segmented pricing?
It is when different customers pay different prices for the same product.
What is product form pricing?
Different versions of a product are not priced the same, and the difference is not due to the difference in costs to produce the product.
What is location-based pricing?
It is when products are charged differently for being in different locations even though production costs.
What is time-based pricing?
It is when products with the same production costs are charged at different prices at different times.
What is psychological pricing?
It refers to the human aspects of viewing price rather than just the economical component of it.
What is a reference price?
It is the price that consumers have in mind before a purchase that is used to evaluate the price of an item that they wish to purchase.
What is promotional pricing?
Promotional pricing is temporarily marking down a list price to create a sense of urgency.
What is FOB-origin pricing?
It is free-on-board, where the manufacturer places the product in a freight transporter for free, where the customer is responsible for and pays for the rest.
What is uniform-delivered pricing?
It is when the company charges the same price to all customers regardless of freight fees.
What is zone pricing?
It is between FOB and uniform pricing, where geographic zones are set up based on shipping costs and a uniform price is set up in each zone.
What is base-point pricing?
It is when prices are based on distance from customer to a base point regardless of where it is actually shipped from.
What is freight-absorbing pricing?
It is when retailers absorb some or all of the shipping cost to gain customers.
What is dynamic pricing?
It is constantly adjusting prices to meet the current needs of customers and the situation.
What factors determine international pricing?
Those are economics, competition, laws and regulations, nature of wholesaling and retail system, consumer preferences and perceptions, objectives of selling in another country and the costs of doing so there.
Why do prices fall?
Excess inventory, falling demand, attempted market penetration.
Why do prices rise?
That is because of cost inflation and consumer demand.
How do buyers respond to price increases?
It can lead to a belief that the product is more exclusive or better made, or they could think that the company is being greedy.
How do buyers respond to price reductions?
Better deal on an exclusive product, tarnished brand image, reduction in quality.
How do competitors respond to pries increases?
Company is trying to gain market share, is trying to boost poor sales, or wants to sell more products so the y force the whole industry to reduce prices.
How should companies respond to a competitors price reduction?
They could reduce prices to match the competitor, could offer more for the current price or even more for more, or they could launch a low-priced competition brand.
What two inner-channel practices are illegal?
They are to fix prices in a trust and to engage in preadory pricing (selling below costs to drive competitor out of business).
What cross-channel pricing practices are illegal?
Those are discrimatory and misleading pricing along with marking down prices from artificially high prices to regular low prices in sales.
