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MARK 301 > Chapter 9 - Pricing > Flashcards

Chapter 9 - Pricing Flashcards

1
Q

Equation for pricing

A 
profit = total revenue - total cost 
profit = (unit price x quantity sold) - total coast
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2
Q

what is price?

A

total value exchanged for benefits of having/using the product

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3
Q

4 approaches to pricing

A

demand oriented

cost oriented

profit oriented

competition oriented

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4
Q

demand oriented pricing

A 
market skimming 
penetration
prestige 
odd even 
target 
bundle 
yield management 
loss leaders
dynamic pricing
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5
Q

market skimming

A

high initial price to skim revenue from those willing to pay

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6
Q

market penetration

A

low initial price to penetrate market and gain market share due to price sensitivity
(works with price sensitive customers)

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7
Q

product line pricing aka price lining

A

setting prices across an entire product line

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8
Q

optional product pricing

A

pricing optional products sold with main product

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9
Q

captive product pricing

A

pricing products which must be used with main product

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10
Q

by product pricing

A

pricing by products to maximize revenues

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11
Q

product bundle pricing

A

pricing a bundle of individual products at a price lower than if purchased separately

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12
Q

prestige pricing

A

high prices attract quality or status

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13
Q

odd even pricing

A

setting prices a dollar or cent under an even number

over used and has less effect

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14
Q

target pricing (customer value)

A

offering just the right combination of quality and service at the price consumers are willing to pay

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15
Q

yield management pricing

A

charging different prices to maximize revenue

ex) airlines

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16
Q

loss leaders

A

deliberately offering some high demand products at very low prices

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17
Q

price adjustment strategy talked about in class

A

dynamic pricing

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18
Q

dynamic pricing

A

allows price to change as customer and situational forces change

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19
Q

what is the main goal of cost oriented approaches?

A

to cover direct expenses.

20
Q

% of markup is relative to …

% of margin is relative to…

A

% markup relative to cost

% margin relative to price

21
Q

formula for total cost

A

total cost = fixed cost + variable cost

22
Q

fixed cost

A

sum of expenses of the firm that are stable and do not change with the quantity of product that is produced and sold
ex) rent, salaries, insurance

23
Q

variable cost

A

sum of the expenses of the firm that vary directly with the quantity of product that is produced and sold
ex) direct labor and materials used

24
Q

total cost

A

fixed cost + variable cost

25
Q

break even analysis

A

analyzes relationship between total revenue and total cost to determine profitability at various levels of output

26
Q

profit oriented approaches

A

target pricing
target return on sales
target return on investments

27
Q

formula for return on investment

A

(gain attributed to investment - cost of invesment) divided by cost of investment

28
Q

demand curve

A

shows number of products that are sold at given price

29
Q

price elasticity

A

how sensitive consumer demand and the firm’s revenues are to changes in the product’s price

high elasticity means small change, high change in demand

30
Q

3 different pricing objectives

A

maximizing profit

managing long run profits

target return

31
Q

limiting factors of price

A

demand for the product class, product, and brand

newness of the product: stage in the PLC

cost of producing and marketing the product

competitors prices

32
Q

pricing within channel levels

A 
price fixing (price collusion)
predatory pricing: forcing rivals to exit
33
Q

pricing across channel levels

A

price discrimination: different prices to different consumers

retail price maintenance: MSRP only

deceptive pricing: not honouring advertised price

34
Q

bait and switch pricing

A

baited with low and switched with high price product

uses technique like not having it in stock

35
Q

bargains conditional on other purchases

A

advertisement at buy one get one free

if price of first item is marked up that’s deceptive

36
Q

price comparisons

A

things like saying it’s below retail value but really the region isn’t at retail value

advertising “below manufacturer’s suggested list price”

with reduced prices, this is deceptive if the item was not offered for sale at the regularly high price for a substantial previous period of time

37
Q

double ticketing

A

when more than one price tag, the lower price is charged

38
Q

dumping

A

foreign firm sells things below domestic price because receiving loans from government

39
Q

grey market (parallel importing)

A

situations where products are sold through unauthorized channels of distribution

40
Q

steps of setting final price

A
  1. select approx price
  2. set the list or quoted price (through one price policy or flexible price policy)
  3. make adjustments to list or quoted price
  4. monitor
41
Q

allowances

A

are reductions for rewarding particular activity

trade in allowances

promotional allowances

42
Q

standard mark up

A

the difference between selling price and cost, expressed as percentage

43
Q

loss leader pricing

A

deliberately sell commonly used products such as paper towels soft drinks and facial tissues at a low price to attract consumers

44
Q

3 other key factors in demand curve

A

consumer tastes

price and availability of similar products

consumer income

45
Q

what is the break even point?

A

quantity at which total revenue and total cost are equal

profit happens after BEP.

BEP = fixed cost over (unit price - unit variable cost)

MARK 301 (11 decks)

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