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71 Cards in this Set
- Front
- Back
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True or False Pricing provides information about a product’s quality? |
True |
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The overall sacrifice a consumer makes to acquire a productor service is known as _______ |
Price |
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Price is the one element in the marketing mix that______ _______ |
generates revenue |
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Pricing is the ______ _____ of the four p’s |
least understood |
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True or False: A firm with a primary objective of very high salesgrowth will have the same pricing strategy as a firm with a primary objectiveof being a quality leader. |
False |
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By focusing on target profit pricing, maximizing profits ortarget return pricing, a firm is implementing a _______ _________. |
profit orientation |
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Firms that believe increasing sales will help the firm more than increasing profits use the: |
sales orientation strategy |
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A firm may set low prices to do what three things? |
Take market share away from competitors, encourage currentfirms to leave the market, and discourage firms from entering the market |
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Some specialty retailers attempt to compete, not by settinglow prices, but by justifying higher prices through high levels of personalizedservice. This is an example of a _______ orientation to pricing. |
customer |
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At the break even point, profits on the sale of a product are: |
zero |
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For most products, demand increases as the price deacreases. Becaue of this general trend, demand curves usually have a ______ slope. |
downward |
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Channelmembers consist of: |
manufacturers,wholesalers, retailers |
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If an authorized retailer sells products to an unauthorizedretailer who then sells to consumers at prices far below what authorizeddealers can charge: |
The discount retailer might fail to provide sufficientservice. |
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Irregular, though not necessarily illegal, methods ofpricing are known as: |
gray market |
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Although it is not always the case, many firms expect the unit cost to drop significantly as the accumulated volume sold increased, and effect known as the ___ ___ effect |
experience curve |
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Benefits of a market penetration pricing strategy: |
Potential to gain market share, discourages potential competitors, potential to build sales, potential to earn profits |
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Drawbacks of a market penetration pricing strategy: |
Low quality perception, leaving money on the table, need large production capacity |
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When consumers perceive that different companies sellproducts that are commodities, it is known as: |
pure competition |
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When consumers relish the challenge of getting the lowestprice and are willing to expend the time and effort to seek out the lowestprice every time, retailers should use a ________ strategy |
high/low pricing |
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A break-even analysis graph contains what? |
Fixed costs, total revenue, total costs |
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With a ____ pricing strategy, companies stress thecontinuity of their retail prices at a level somewhere between the regularprice and the deep-discount sales prices their competitors may offer |
everyday low |
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Price |
the overall sacrifice a consumer is willing to make-money, time, energy-to acquire a specific product or service |
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Five CriticalComponents of Pricing |
Competition, Costs,Company Objectives, Customers, Channel members |
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Profit orientation |
a company objectivethat can be implemented by focusing on target profit pricing, maximizingprofits, or target return pricing |
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Target profit pricing |
a pricing strategyimplemented by firms when they have a particular profit goal as theiroverriding concern; uses price to stimulate a certain level of sales at acertain profit per unit |
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Maximizing profits |
a profit strategythat relies primarily on economic theory. IF a firm can accurately specify amathematical model that captures all the factors required to explain andpredict sales and profits, it should be able to identify the price at which itsprofits are maximized. |
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Target return pricing |
a pricing strategyimplemented by firms less concerned with the absolute level of profits and moreinterested in the rate at which their profits are generated relative to theirinvestments; designed to produce a specific return on investment,usually expressed as a percentage of sales. |
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Sales orientation |
a company objective based on the belief that increasing sales will help the firm more than will increasing profits |
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Premium pricing |
a competitor based principle method by which the firm deliberately prices a product above the prices set for competing products to capture those consumers who always shop for the best or for whom price does not matter |
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Competitor orientation |
a company objectivebased on the premise that the firm should measure itself primarily against itscompetitionways |
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Competitive parity |
a firm’s strategy ofsetting prices that are similar to those of major competitors |
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Status Quo Pricing |
acompetitor-orientated strategy in which a firm changes prices only to meetthose of competition |
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Customer orientation |
a company objectivebased on the premise that the firm should measure itself primarily according towhether it meets its customers’ needs |
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demand curve |
showshow many units of a product or service consumers will demand during a specificperiod at different prices. |
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Prestige products or services
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thosethat consumers purchase for status rather than functionality
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Price elasticity ofdemand
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measures how changes in a price affect the quantity of the product demanded; specifically the ratio of the percentage change in quantity demanded to the percentage change in price |
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elastic |
refers to a marketfor a product or service that is price sensitive; that is, relatively smallchanges in price will generate fairly large changes in the quantity demanded |
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Inelastic |
refers to a marketfor a product or service that is price insensitive; that is, relatively smallchanges in price will not generate large changes in the quantity demanded |
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Dynamic or Individualizedpricing |
refers to the process of charging different prices for goods or services based on the type of customer, time of the day, week, or even season, and level of demand. |
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Income effect |
refers to the change in the quantity of a product demanded by consumer due to a change in their income |
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Substitution effect |
refers to consumer’sability to substitute other products for the focal brand, thus increasing theprice elasticity of demand for the focal brand |
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Cross-priceelasticity |
the percentage change in demand for Product A that occurs in response to a percentage change in price of product B |
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Complimentaryproducts |
products whose demandcurves are positively related, such that they rise or fall together; a percentageincrease in demand for one results in a percentage increase in demand for theother |
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Substitute products |
products for which changes in demand are negatively related; that is, a percentage increase in the quantity demanded for product A results in a percentage decrease in the quantity demanded for product B |
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Variable costs |
those costs,primarily labor and materials, that vary with production volume |
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Fixed Costs |
those costs thatremain essentially at the same level, regardless of any changes in the volumeof production |
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total cost |
the sum of the variable and fixed costs |
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Break-even analysis |
technique used to examine the relationships among cost, price, revenue, and profit over different levels of production and sales to determine the break-even point |
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Break-even point |
the point at whichthe number of units sold generates just enough revenue to equal the totalcosts; at this point, profits are zero |
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Contribution per unit |
equals the price lessthe variable cost per unit. Variable used to determine the break-even point inunits |
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Monopoly |
one firm provides theproduct or service in a particular industry |
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Oligopolistic competition |
occurs when only afew firms dominate a market |
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Price war |
occurs when two ormore firms compete primarily by lowering their prices |
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Predatory pricing |
a firm’s practice ofsetting a very low price for one or more of its products with the intent todrive its competition out of business; illegal, under both the Sherman AntitrustAct and the Federal Trade Commission Act |
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Monopolistic competition |
occurs when there aremany firms that sell closely related but not homogeneous products; theseproducts may be viewed as substitutes but are not perfect substitutes |
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Pure competition |
occurs when differentcompanies sell commodity products that consumers perceive as substitutable;price usually is set according to the laws of supply and demand |
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Gray market |
employs irregular butnot necessarily illegal methods; generally, it legally circumvents authorizedchannels of distribution to sell goods at prices lower than those intended bythe manufacturer |
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Everyday low pricing(EDLP) |
a strategy companies use to emphasize thecontinuity of their retail prices at a level somewhere between the regular,nonsale price and the deep discount sale prices their competitors may offer |
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High/low pricing |
a pricing strategy that relies on the promotion of sales, during which prices are temporarily reduced to encourage purchases |
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Reference price |
the price againstwhich buyers compare the actual selling price of the product and that facilitatestheir evaluation process |
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Market penetrationstrategy |
a growth strategythat employs the existing marketing mix and focuses the firm’s efforts onexisting customers |
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Experience curveeffect |
refers to the drop-in unit cost as the accumulated volume sold increases; as sales continue to grow, the costs continue to drop allowing even further reduction in the price |
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Price skimming |
a strategy of sellinga new product or service at a high price that innovators and early adopters arewilling to pay in order to obtain it; after the high-price market segmentbecomes saturated and sales begin to slow down, the firm generally lowers theprice to capture (or skim) the next most price-sensitive segment |
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Loss leader pricing |
takes the tactic ofleader pricing one step further by lowering the price below the store’s cost |
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Bait and switch |
a deceptive practiceof luring customers into the store with a very low advertised price on an item(the bait), only to aggressively pressure them into purchasing a higher pricedmodel (the switch) by disparaging the low-priced item, comparing it unfavorablywith the higher priced model or professing an inadequate supply of thelower-priced item |
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Predatory pricing |
a firm’s practice ofsetting a very low price for one or more of its products with the intent todrive its competition out of business; illegal under both the Sherman AntitrustAct and the Federal Trade Commission Act |
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Price Discrimination |
the practice of selling the same product to different resellers (wholesalers,distributors, or retailers) or to the ultimate consumer at different prices;some, but not all, forms of price discrimination are illegal |
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Price fixing |
the practice ofcolluding with other firms to control prices |
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Horizontal pricefixing |
occurs whencompetitors that produce and sell competing products collude or work togetherto control prices, effectively taking price out of the decision process forconsumers |
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Vertical price fixing |
occurs when partiesat different levels of the same marketing channel (eg manufacturers andretailers) collude to control the prices passed on to consumers |
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Manufacturer’s suggestedretail price (MSRPailers) |
The price thatmanufacturers suggest retailers use to sell their merchandise |
