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58 Cards in this Set
- Front
- Back
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the amount of money charged for a product or service. It is the sum of all the values that consumers give up in order to gain the benefits of having or using a product or service |
Price |
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the only element in the marketing mix that produces revenue; all other elements represents costs |
Price |
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No demand above this price |
Price ceiling |
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No profits below this price |
Price floor |
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Considerations in setting price |
•Customer perceptions of value •Other internal and external considerations •Product costs |
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setting price based on buyer's perceptions of value rather than on seller's costs |
Customer Value- based Pricing |
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it is customer driven |
Value-based pricing |
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it is product driven |
Cost-based pricing |
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offers the right combination of quality and good service at a fair price |
Good-value pricing |
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Type of good-value pricing |
•Everyday low pricing (EDLP) •High-low pricing |
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charging a constant everyday low price with few or no temporary price discounts |
Everyday low pricing |
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charging higher prices on an everyday basis but running frequent promotions to lower prices temporarily on selected items |
High-low pricing |
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attaches value-added features and services to differentiate offers, support higher prices, and build pricing power |
Value-added pricing |
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setting prices based on the costs for producing, distributing, and selling the product plus a fair rate of return for effort and risk |
Cost-based pricing |
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Types of costs |
Fixed costs, Variable costs, total costs |
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The costs that do not vary with production or sales level |
Fixed costs |
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The costs that vary with the level of production |
Variable costs |
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The sum of fixed and variable costs for any given level of production |
Total costs |
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The cost associated with a given level of output |
Average costs |
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adding a standard markup to the cost of the product |
Cost-plus pricing (markup pricing) |
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Setting the price to break even on the costs of making and marketing a product or setting setting price to make atarget return |
Break-even pricing (target return pricing) |
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Uses the concept of a break even chart shows the TC and TR expected at different sales volume levels |
Target return pricing |
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starts with an ideal selling price based on consumer value considerations and then targets costs that will ensure that the price is met |
Target costing |
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shows the number of units the market will buy in a given period at different prices |
Demand curve |
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illustrates the response of demand to a change in price |
Price elasticity of demand |
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occurs when demand hardly changes when there is a small change in price |
Inelastic demand |
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occurs when demand changes greatly for a small change in price |
Elastic demand |
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Types of market |
•Pure competition •Monopolistic competition •Oligopolostic competition •Pure monopoly |
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New product pricing strategies |
•Market-skimming pricing •Market-penetration pricing |
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Setting a high price for new product to skim maximum revenues layer by layer from the segments willing to pay the high price; the company makes fewer but more profitable sales |
Market-skimming pricing (price skimming) |
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Setting a low price for a new produce to attract a large number of buyers and a large market share |
Market-penetration pricing |
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Product mix pricing strategies |
•product line pricing •optional-product pricing •captive product pricing •by-product pricing •product bundle pricing |
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setting the price strips between various products line based on costs, differences between the products, customer evaluation of different features, and competitors' prices |
Product line pricing |
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the pricing of optional or accessory products along with the main product |
Optional-product pricing |
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setting a price for products that must be used along with the main product, such as blades for razor and games for a videogame console |
Captive-product pricing |
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setting a price for by-products to make the main products more competitive |
By-product pricing |
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bundles of products sold together |
Product bundle pricing |
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Price-Adjustment startegies |
•discount and allowance pricing •segmented pricing •psychological pricing •promotional pricing •geographical pricing •dynamic pricing •international pricing |
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straight reduction in price on purchases during a stated period of time or larger quantities |
Discount and allowance pricing |
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setting a product or service at two or more prices, where the difference in prices is not based on differences in costs |
Segmented pricing |
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occurs when sellers consider the psychology of prices and not simply the economics |
Psychological pricing |
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prices that buyers carry in their minds and refer to when looking at a given product |
Reference prices |
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temporarily pricing products below the list price, and sometimes even below cost, to increase short-run |
Promotional pricing |
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setting prices for customers located in different parts of the country or world |
Geographical pricing |
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Types of geographical pricing |
•FOB-Origin pricing •Uniformed-delivered pricing •Zone pricing •Basing-point pricing •Freight-absorption pricing |
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geographical pricing strategy in which goods are placed free on board a carrier, the customer pays the freight from the factory to the destination |
FOB-origin pricing |
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means the company charges the same price plus freight to all customers, regardless of location |
Uniformed-delivered pricing |
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means that the company sets up two or more zones where customers within a given zone pay a single total price, the more distant the zone the higher the price |
Zone pricing |
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means that a seller selects a given city as a “basing point” and charges all customers the freight cost associated from that city to the customer location |
Basing-point pricing |
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means the seller absorbs all or part of the actual freight charge as an incentive to attract business in competitive markets |
Freight-absorption pricing |
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when prices are adjusted continually to meet the characteristics and needs of the individual customer and situations |
Dynamic pricing |
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when prices are set in a specific country based on country-specific factors |
International pricing |
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Price cuts occur due to: |
Excess capacity and increased market share |
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Price increase from: |
Cost inflation, increased demand, lack of supply |
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Sellers must set prices without talking to competitors |
Price fixing |
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Selling below cost with the intention of punishing a competitor or gaining higher long-term profits by putting competitors out of business |
Predatory pricing |
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when a manufacturer requires a dealer to charge a specific retail price for its products |
Retail (resale) price maintenance |
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occurs when a seller states prices or price savings that mislead consumers or are not actually available to consumers |
Deceptive pricing |
