Reading...
Play button
Play button
Use LEFT and RIGHT arrow keys to navigate between flashcards;
Use UP and DOWN arrow keys to flip the card;
H to show hint;
A reads text to speech;
41 Cards in this Set
- Front
- Back
|
o Price
|
—is the amount of money that is charged for “something” of value
• Can be called different names: tuition, rent, rates • Almost every business transaction in our modern economy involves an exchange of money—the ___—for something |
|
|
o Target return objective
|
—sets a specific level of profit as an objective
• Has administrative advantages in a large company |
|
|
• Profit maximization objective
|
—seeks to get as much profit as possible.
o Might be to earn a rapid return on investment o BUT: If a firm is earning a large profit, competitors will try to copy or improve on what the company offers, leading to lower prices |
|
|
• Sales-oriented objective
|
—seeks some level of unit sales, dollar sales, or share of market—without referring to profit
• Sales growth ≠ profit • Many firms seek to gain a specified share (percent) of a market o Large market share = better economies of scale than its competitors o Want when market is growing • Don’t want a large market share if gained at too low a price • Profitless “success” |
|
|
• Status quo objectives
|
—don’t rock the pricing boat objectives
o Most common when the total market is not growing o Want to stabilize prices |
|
|
• Non-price competition
|
—aggressive action on one or more of the Ps other than Price
|
|
|
• Administered prices
|
—consciously set prices
o What price policies usually lead to o Instead of letting daily market forces (or auctions) decide their prices, most firms set their own prices |
|
|
• One-price-policy
|
—means offering the same price to all customers who purchase products under essentially the same conditions and in the same quantities
o What majority of US firms use—mainly for administrative convenience and to maintain goodwill among customers o Makes pricing easier o Careful to avoid rigid one-price-policy → don’t want competitors to always undercut |
|
|
• Flexible-price-policy
|
—means offering the same product and quantities to different customers at different prices
o Focus more on what type of customer will get a price break o Pricing databases make flexible pricing easier o Ex: discounts to senior citizens for a cruise; discounts to frequent shopper club members; priceline.com → “set your own price” o Most common in the channels, in direct sales of business products, and at retail for expensive shopping products • Also retail shopkeepers in less developed economies typically use this • Involve personal selling, not mass selling → bargaining |
|
|
• Skimming price policy
|
—tries to sell the top (skim the cream) of a market—the top of the demand curve—at a high price before aiming at more price-sensitive customers
o May maximize profits in the market introduction stage (especially if there are few substitutes or if some customers are not price sensitive). o Also useful when you don’t know very much about the shape of the demand curve—sometimes safer to start with a high price that can be reduced if customers balk. o Feeling out demand at a high price o Arguments that firms should not try to max profits with this price policy on new products that have important social consequences—drugs for example. o Prices slowly decrease overtime |
|
|
• Penetration pricing policy
|
—tries to sell the whole market at one low price
o Get volume at a low price o Wise when the elite market—those willing to pay a high price—is small • i.e. when whole demand curve is elastic (flat) o Able to sell larger quantities results in lower costs because of economies to scale. o Wise when the firm expects strong competition very soon after introduction |
|
|
o Introductory price dealing
|
—temporary price cuts—to speed new products into a market and get customers to try them
• Because low prices DO attract customers • DO NOT confuse with temporary price cuts with low penetration prices • Plan here is to raise prices as soon as the introductory offer is over → by then hope customers decide is it worth it to buy it again at the regular price • Established competitors often choose not the meet introductory price dealing—as long as the introductory period is not too long or too successful • Some match the intro price deals with their own short-term sale prices to discourage customers from shopping around |
|
|
o Basic list prices
|
—are the prices final customers or users are normally asked to pay for products
• Most price structures are built around a base price schedule or list price |
|
|
• Discounts
|
—are reductions from list price given by a seller to buyers who either give up some marketing function or provide the function themselves
quantity, cumulative, noncumulative, seasonal discounts |
|
|
o Quantity discounts
|
—are discounts offered to encourage customers to buy in larger amounts
• Gives seller more of the buyers’ business • Can help reduce storing costs |
|
|
o Cumulative quantity discounts
|
—apply to purchases over a given period—such as a year—and the discount usually increases as the amount purchased increase
• Encourages repeat buying • Way to develop loyalty and ongoing relationships with customers |
|
|
o Noncumulative quantity discounts
|
—apply only to individual orders
• Encourage larger orders but do not tie a buyer to the seller after the one purchase |
|
|
o Seasonal discounts
|
—are discounts offered to encourage buyers to buy earlier than present demand requires
• Tends to shift storing function further along in the channel and tends to even out sales over the year –like for a business that sells winter gear, sell it cheaper in the summer |
|
|
o Net
|
—means the payment for the face value of the invoice is due immediately
• ___ 10 = payment due in 10 days |
|
|
o Cash discounts
|
—are reductions in price to encourage buyers to pay their bills quickly
|
|
|
o 2/10 net 30
|
—means the buyer can take a 2 percent discount off the face value of the invoice if the invoice is paid within 10 days otherwise the full face value is due within 30 days
• Interest charged after 30 days |
|
|
• Sale price
|
—is a temporary discount from the list price
o Encourage immediate buying o i.e. the customer gives up the convenience of buying when they want to buy and instead when the seller wants to sell o Quick way to respond to changing market conditions without changing the basic marketing strategy |
|
|
• Everyday low pricing
|
—setting a low list price rather than relying on frequent sales, discounts, or allowances → EDLP
|
|
|
• Allowances
|
—like discounts, are given to final consumers, business customers, or channel members for doing something or accepting less of something
advertising, stocking, push money/prize money, trade-in |
|
|
Advertising allowances
|
—are price reductions given to firms in the channel to encourage them to advertise or otherwise promote the supplier’s products loyally
o Ex: Sony can give an ______ (3 percent of sales) to its retailers and they are in turn expected to spend the allowance on local advertising |
|
|
• Stocking allowances
|
—sometimes called slotting allowances—are given to an intermediary to get shelf space for a product
o Supermarkets more willing to give space to a new product if the supplier will offset their handling costs and risks |
|
|
• Push money (or prize money) allowances
|
—sometimes called PMs or spiffs—are given to retailers by manufacturers or wholesalers to pass on to the retailers’ salesclerks for aggressively selling certain items
o Used for new, slower moving, or higher margin items o Workers earn extra money for selling certain things |
|
|
• Trade-in allowance
|
—is a price reduction given for used products when similar new products are bought
o Gives an easy way to lower the effective price without reducing list price o Bring in the old, ring in the new—with trade-ins |
|
|
• Rebates
|
—refunds paid to consumers after a purchase
o Give a producer a way to be certain that final consumers actually get the price reduction |
|
|
o FOB
|
—means free on board some vehicle at some place
o Typically names the place—often the location of the seller’s factory or warehouse—as in ___ mill o Seller pays cost of loading products onto some vehicle then title to the products passes to the buyers → buyer pays the freight and takes responsibility for damage in transit |
|
|
• Zone pricing
|
—means making an average freight charge to all buyers within specific geographic areas
o Smooth’s delivered prices |
|
|
• Uniform delivered pricing
|
—means making an average freight charge to all buyers
o One price to all o Most often used when (1) transportation costs are relatively low and (2) the seller wishes to sell in all geographic areas at one price, maybe according to the nation |
|
|
• Freight-absorption pricing
|
—means absorbing freight cost so that a firm’s delivered price meets that of the nearest competitor
|
|
|
• Value pricing
|
—means setting a fair price level for a marketing mix that really gives the target market superior customer value
o Focus in on the customers requirements and how the whole marketing mix meets those needs o Companies that use value pricing deliver on their promises |
|
|
• Unfair trade practice act
|
—puts a lower limit on prices, especially at the wholesale and retail levels
o Minimum prices are controlled o Prevents companies from price cutting to such an extent that all other competitors die out → anti monopolistic practice kind of |
|
|
• Dumping
|
–is pricing a product sold in a foreign market below the cost of producing it or at a price lower than in its domestic market
o Anti____ing laws control the minimum price of imported products o Protects country’s domestic producers and jobs |
|
|
• Phony list prices
|
—prices customers are shown to suggest that the price has been discounted from the list
o FTC tries to stop such pricing—using the Wheeler Lea Amendment—which bans “unfair or deceptive acts in commerce” |
|
|
Wheeler Lea Amendment
|
—which bans “unfair or deceptive acts in commerce”
|
|
|
• Price fixing
|
—competitors getting together to raise, lower, or stabilize prices—is common and relatively easy
o Totally illegal in the US o Considered conspiracy |
|
|
• Robinson-Patman Act
|
—makes illegal any price discrimination—selling the same products to different buyers at different prices—if it injures competition.
o Okay to have price differences only if based on (1) cost differences or (2) the need to meet competition |
|
|
price discrimination
|
—selling the same products to different buyers at different prices
|
