Pricing (Chapter 10) Flashcards
Fixed cost
Costs of production that do not change with the number of units produced.
Average fixed cost
Fixed cost per unit produced
Total costs
Total of the fixed costs and variable costs for a set number of units produced.
Markup
Amount added to cost of a product to create price at which a channel member will sell product.
Gross margin
Markup amount added to cost of .a product to cover the fixed costs of the retailer or wholesaler and leave an amount for profit.
Retailer margin
Margin added to the cost of a product by a retailer.
Wholesaler margin
Amount added to the cost of a product by a wholesaler.
List price or manufacturer’s suggested retail price (MSRP)
Price that manufacturer sets as appropriate price for end consumer to pay.
Value pricing or everyday low pricing (EDLP)
A pricing strategy in which a firm sets prices that provide ultimate value to customers.
Skimming price
A very high, premium price that firm charges for its new, highly desirable product.
Penetration pricing
A pricing strategy in which a firm introduces a new product at a very low price to encourage more customers to purchase it.
Trial pricing
Pricing a new product low for a limited period of time in order to lower the risk for a customer.
F.O.B. origin pricing
A pricing tactic in which the cost of transporting the product from the factory to the customer’s location is the responsibility of the customer.
F.O.B. delivered pricing
A pricing tactic in which the cost of loading and transporting the product to the customer is included in the selling price and is paid by the manufacturer.
Uniform delivered pricing
Pricing tactic in which a firm adds a standard shipping charge to the price for all customers regardless of location.
