Mkt 230 Chapter 11

Front 1

Price

Back 1

The assignment of value, or the amount the customers must exchange to receive the offering.

Front 2

How important are good pricing decisions?

Back 2

Most consumers rank a “reasonable” price as the most important consumption consideration, and also influences WHERE people shop.

Front 3

Steps in Price Planning:

Back 3

Develop Pricing Objectives
Estimate Demand
Determine Costs
Evaluate the Pricing Environment
Choose a Pricing Strategy
Develop Pricing Tactics

Front 4

The most important step in Price Planning

Back 4

first step wherein one determines the pricing objective BEFORE establishing a price.

Front 5

Marketers can also sometimes influence the nature of the demand curve by shifting

Back 5

it upwards (e.g., a very successful advertising campaign). The effect of an upwards shift in a demand curve is to increase quantity demand for a given price.

Front 6

Acceleration Principle

Back 6

A principle that holds that a small change in consumer demand for a product can result in a large change in the demand for org goods and services to product the product.

Front 7

Elastic Demand

Back 7

demand in which changes in price have large effects on the amount demanded (e.g., leisure activities, vacations).

Front 8

Interpretation

Back 8

If the calculated price elasticity is greater than 1.0, demand is elastic.

Front 9

• Variable Costs

Back 9

The costs of production (raw and processed materials, parts, and labor) that are tied to and vary depending on the number of units produced

Front 10

• Fixed Costs

Back 10

Costs of production that do not change with the number of units produced (e.g., costs of owning and maintaining the factory, utilities, equipment costs, salaries of firm executives).

Front 11

Break-Even Point

Back 11

The point at which the total revenue and total costs are equal and beyond which the company makes a profit; below that point, the firm will suffer a loss.

Front 12

Profit is maximized at the point at which

Back 12

marginal cost is exactly equal to marginal revenue.

Front 13

EDLP

Back 13

a form of pricing based on customer needs

Front 14

The size of the basket

Back 14

key to building business and the EDLP stores have certainly achieve this more effectively than those retailers pursuing a Hi/Lo strategy.

Front 15

Do consumers prefer EDLP or promotions?

Back 15

EDLP

Front 16

Penetration Pricing

Back 16

A pricing strategy in which a firm introduces a new product at a very low price to encourage more customers to purchase it. This is often used to discourage competitors from entering the marketplace. Here penetration pricing acts as a barrier to entry.

Front 17

Two Part Pricing

Back 17

Requires two separate types of payments to purchase the product. For example, ISU’s recreation center requires an annual user fee PLUS a coutry fee for racquetball.

Front 18

Price Bundling

Back 18

Selling 2 or more goods or services as a single package for one price.
(Ex: “all you can eat” restaurant specials, Model packages for automobiles, TV services)

Front 19

F.O.B. Origin Pricing

Back 19

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.

Front 20

F.O.B. Delivered Pricing

Back 20

A pricing tactic in which the cost of transporting the product from the factory to the customer’s location is included in the selling price and is paid by the manufacturer.

Front 21

Basing Point Pricing

Back 21

A pricing tactic where customers pay shipping charges from set basing point locations whether the goods are actually shipped from these points or not.

Front 22

Uniform Delivered Pricing

Back 22

A pricing tactic in which a firm adds a standard shipping charge to the price for all customers regardless of location

Front 23

Freight Absorption Pricing

Back 23

A pricing tactic I which the seller absorbs the total cost of transportation

Front 24

Distribution Based Pricing--

Back 24

“Price bundling” is NOT one of these

Front 25

• Cash Discounts

Back 25

Enticing customers to pay their bills quickly. Ex: “2% 10 days, net 30 days” means that the amount due is 2% less IF the bill is paid within 10 days, and the bill is due in 30 days regardless.

Front 26

Internal Reference Prices

Back 26

A set price or a price range in consumers’ minds that they refer to in evaluating a product’s price.

Front 27

Assimilation effects

Back 27

occur when two equal (substitute) products involve the same internal reference points.

Front 28

Contrast effects

Back 28

occur when two products are far apart (e.g., big quality differences).

You need contrast to occur to support higher prices when compared to competitive products.

Front 29

Price Lining

Back 29

The practice of setting a limited number of different specific prices, called price points, for the items in a product line

Front 30

Price points

Back 30

Prices for which demand is relatively high

Front 31

Bait-and-Switch

Back 31

An illegal marketing practice in which an advertised price special is used to as bait to get customers into the store with the intention of switching them to a higher-priced item. Here there is never an intention to sell the bait items. (example: Circuit City and Great Lakes).

Front 32

Predatory Pricing

Back 32

means that a company sets a very low price for the purpose of driving competitors out of business.

Front 33

Price Fairness

Back 33

A consumer’s assessment and associated emotions of whether the difference (or lack of difference) between a seller’s price and the price of a comparative other party is reasonable, acceptable, or justifiable.

Front 34

Price Fairness Process

Back 34

1. Price comparison --> Perceived Price Fairness, Cognitive, Affective --> Perceived value and Negative emotions --> Actions