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35 Cards in this Set

  • Front
  • Back
Price
The overall sacrifice a consumer is willing to make to acquire a specific product or service
Profit orientation
A company objective that can be implemented by focusing on target profit pricing, maximizing profits, or target return pricing
Target profit pricing
A pricing strategy implemented by firms when they have a particular profit goal as their overriding concern; uses price to stimulate a certain level of sales at a certain profit per unit
Maximizing profits
A profit strategy that relies primarily on economic theory. If a firm can accurately specify a mathematical model that captures all the factors required to explain and predict sales and profits, it should be able to identify the price at which its profits are maxamized
Target return pricing
A pricing strategy implemented by firms less concerned with the absolute level of profits and more interested in the rate at which their profits are generated relative to their investments; designed to produce a specific return on investment, usually expressed as a percentage of sales
Sales Orientation
Belief that increasing sales will help the firm more than will increasing profits
Premium Pricing
The firm deliberately prices a product above the prices set for competing products to capture those customers who always shot for the best or for whom price does not matter
Competitor orientation
Strategize according to the premise that they should measure themselves primarily against their competition
Competitive parity
Set prices similar to those of their major competitors
Status quo pricing
Changes in price only to meet those of the competition
Customer Orientation
A firm should measure itself primarily according to whether it meets its customers' needs
Demand curve
Shows how many units of a product or service consumers will demand during a specific period of time at different prices
Prestige products/services
Consumers purchase for their status rather than their functionality
Price elasticity of demand
Measures how change in a price affect the quantity of the product. % change in demand/ % change in price
Elastic
The market for a product or service is price sensitive
Inelastic
The market for a product is price insensitive
Income Effect
Refers to the change in the quantity of a product demand by consumers due to a change in their income
Substitution Effect
Refers the the consumers' ability to substitute other products for the focal brand
Cross-price elasticity
The % change in the quantity of Product A demanded compared with the % change in price Product B
Complementary products
Products whose demands are positively related, such that they rise and fall together
Substitute Products
Changes is their demand are negatively related
Variable Costs
Costs, primarily labor and materials, that vary with production volume
Fixed Costs
Costs that remain essentially at the same level, regardless of any changes in the volume of production
Total Costs
Simply the sum of the variable and fixed costs
Break-even analysis
The relationships among cost, price, revenue, and profit over different levels of production and sales
Break-even point
The point at which the number of units sold generates just enough revenue to equal the total costs
Contribution per unit
Price- variable cost per unit
Monopoly
One firm controls the market
Oligopoly
A handful of firms control the market
Monopolistic Competition
Many firms selling differentiated products at different prices
Pure Competition
Many firms selling commodities for the same prices
Price war
Occurrence in oligopolistic markets compete by lowering prices
Predatory pricing
A firm sets a very low price for one or more of its products with the intent to drive its competition out of business
Gray market
Employs irregular but not necessarily illegal methods. Sells goods at prices lower than those intended by the manufacture
Cross-shopping
The pattern of buying both premium and low-priced merchandise or patronizing both expensive, status-oriented retailers and price-oriented retailers