EXAM #2 Flashcards
TERM: Money or other negotiable instrument exchanged for the ownership or use of a product or service
Price
TERM: Exchange of products/services for products/services; money is not used in the exchange
Barter
TERM: Consumer’s perceived benefit from product/service, e.g. quality, durability
Value
TERM: total money received from sale of product
Total Revenue
TERM: average amount of money received from selling one unit of product = price
Average Revenue
TERM: change in total revenue from producing & marketing one additional unit of that product
Marginal Revenue
TERM: total expense incurred by a company to produce & market a product
Total Cost
TERM: overhead = company’s expenses that are stable, and do not change with quantities of product produced & sold
Fixed Costs
TERM: company’s expenses that change directly with the quantity of product produced & sold
Variable Cost
TERM: change in total cost from producing one more unit of product
Marginal Cost
TERM: conspiracy among companies to set prices for a product; illegal in the US
Price Fixing
ERM: charging different prices to different buyers for the same products
Price Discrimination
TERM: charging a very low price in order to drive competitors out of business
Predatory Pricing
CONCEPT: curve on a graph showing number of units consumers will buy in a given time period, at different prices that might be charged
Demand Curve
CONCEPT: a measure of the sensitivity of demand to changes in price
Price elasticity of Demand
CONCEPT: analysis of relationship between total cost and total revenue to determine profitability at various levels of production
Break-Even Analysis
CONCEPT: straight reduction in price on purchases during stated period of time
Discount
CONCEPT: promotional money paid by manufacturers to retailers in return for featuring manufacturer’s products
Allowance
CONCEPT: geographical pricing strategy where goods are placed Free On Board (FOB) a carrier; customer pays freight from factory to destination
FOB pricing
CONCEPT: geographical pricing strategy where company charges same price plus freight to all customers, regardless of location
Uniform Delivered Pricing
PRICING STRATEGY: setting a very high initial price for a new or innovative product
Skimming Pricing
PRICING STRATEGY: setting a low initial price on a new product to appeal quickly to the mass market
Penetration Pricing
PRICING STRATEGY: setting a high price to attract quality- or status-conscious consumers
Prestige Pricing
PRICING STRATEGY: setting prices for a line of products at a number of different price points
Price Lining
PRICING STRATEGY: pricing a few cents or dollars below an even number, e.g. $11.99 rather than $12.00
Odd-Even Pricing
PRICING STRATEGY: working backwards from price consumers are thought to be willing to pay
Target Pricing
PRICING STRATEGY: marketing 2 or more products or services in a single package price
Bundle Pricing
PRICING STRATEGY: pricing in differentiated categories to maximize revenue for finite capacity; commonly used by airlines
Yield-Management Pricing
PRICING STRATEGY: adding a fixed percentage to the cost of all items in a specific product category
Standard Mark-Up Pricing
PRICING STRATEGY: adding a specific amount to the cost of providing a product or service; common in some professions and in construction
Cost-Plus Pricing = markup pricing
PRICING STRATEGY: pricing based on experience that unit cost of particular product/service declines 10 – 30 % each time a company’s experience at producing and selling them doubles; used in electronics industry
Experience Curve Pricing
PRICING STRATEGY: pricing to achieve a target of a specific $ volume of profit
Target Profit Pricing
PRICING STRATEGY: pricing to return a profit of a specified percentage of sales; used by some supermarket chains
Target Return-On-Sales Pricing
PRICING STRATEGY: pricing to meet a target of a particular return on investment; commonly used by public utilities
Target Return-on-Investment Pricing. Target return pricing is also known as break-even pricing.
PRICING STRATEGY: pricing levels set by tradition, a standardized channel of distribution, or some other competitive factor
Customary Pricing
PRICING STRATEGY: pricing strategy in relation to competitors or market leaders
Above-, At-, or Below-Market Pricing
PRICING STRATEGY: intentionally pricing below customary price, in order to entice customers into sales venue, where they will be tempted to buy other goods, in addition to the loss-leader
Loss-Leader Pricing
PRICING STRATEGY: setting one price for all buyers of a product/service
One-Price Policy = fixed pricing
PRICING STRATEGY: setting different prices for products/services depending on individual buyers and purchase situations
Flexible-Price Policy = Dynamic Pricing
Name four things “Price” is:
the only element in the marketing mix that produces revenue; all other elements represent costs
one of the most flexible elements of marketing mix: price can be changed quickly
the biggest problem for many marketing executives
historically the major factor affecting buyer choice
PRICE = _______ - _______ + _______
= LIST PRICE - DISCOUNTS + FEES
