chapter 11
Which of the following is an example of a demand-oriented approach to setting an approximate price?
prestige
Identifying the correct _______ is complex because small changes can have big effects in both the units sold and related profit.
price
Pricing decisions are difficult because
price simultaneously affects total revenue and total cost.
Cost-Oriented Pricing
pricing that considers the firm's desire to make a profit and its need to cover production costs
The price of a soft drink can act as a ________ for consumers comparing prices of restaurants.
reference value
When a consumer is comparing the costs and benefits of substitute items, he or she is developing a
reference value
Unit Volume Pricing Objective
sell multiple products at very different prices and need to match the unit volume demanded by customers with price and production capacity.
target pricing
set prices based on what you think customers are willing to pay based on perceived value
Prestige Pricing Strategy
setting a high price so that quality or status conscious consumers will be attracted to the product and buy it
customary pricing
setting a price that is dictated by tradition, a standardized channel of distribution, or other competitive factors
odd-even pricing
setting prices a few dollars or cents under an even number
value-oriented pricing
setting prices primarily based on a consumers perceived value of a product or service
what is price
the money or other considerations exchanged for the ownership or use of a product or service
value
the ratio of perceived benefits to the price of the product
Many consumers are willing to pay a premium price to own an iPhone because
they perceive the ease of use and compatibility features as giving this product the highest value.
Break-even quantity
total fixed costs/fixed cost contribution
Profit = _____ - _____
total revenue - total cost or (unit price x quantity sold) - (fixed cost + variable cost)
as benefits increase
value increases
At McDonald's, you can get several items together as a meal, for less than purchasing those items separately. This is an example of ______.
value pricing
unit variable cost
variable cost expressed on a per unit basis for a product
what does it mean that the price must be "right"
-customers will pay for it -it generates enough money to pay for developing, producing, and marketing. -must earn a profit
skimming pricing strategy
A high initial price that companies set when introducing new products in order to get back money invested.
Competition-Oriented Pricing
A pricing method in which a seller uses prices of competing products as a benchmark instead of considering own costs or the customer demand
inelastic demand
A situation in which an increase or a decrease in price will not significantly affect demand for the product
bundle pricing
Packaging together two or more complementary products and selling them at a single price
yield management pricing
a practice of charging different prices to different customers in order to manage capacity while maximizing revenues
Market Share Pricing Objective
adjust price levels so the firm can maintain or increase sales relative to competitors' sales
Quantity Pricing
allows for price discounting on the basis of volume purchased
Demand-Oriented Pricing
considers factors such as taste and preferences
______-oriented approaches to pricing regard expected customer tastes and preferences as the most important factors in the decision.
demand
elastic demand
demand in which changes in price have large effects on the amount demanded
Which of the following may mean that the amount paid is not the same as the list price?
discounts and surcharges
price lining strategy
establishes distinct price categories at which similar items of retail merchandise are offered for sale
final price equation
final price = list price - (allowances) + extra fees
If a firm prices a product low, to the customer this may signal
low quality
If total cost is greater than total revenue, then profit is
negative
According to the value equation, for a given price, as the ________ increase, the value increases.
perceived benefits
four common approaches to find approximate price level
-demand oriented -cost oriented -profit oriented -competition oriented
what are four conditions seen in skimming pricing
-enough customers will pay high price -high price wont attract competitors -lowering the price has minimal effect on increasing sales volume and reducing unit cost -customers see high price as high quality
downward sloping demand curve
A demand curve that is consistent with the law of demand, so that an increase in price leads to a decline in quantity demanded. As a result, the line slopes down when read from left to right.
barter
The process of exchanging one product or service for another
Why are customers willing to pay extra for a Kohler walk-in tub which eliminates the need to step over the side of the tub?
The safety features enhance the product's value.
penetration pricing
a pricing policy whereby a firm charges a relatively low price for a product initially as a way to reach the mass market
According to the price equation, to find the actual price, you should do which two of the following to the list price?
add extra fees subtract incentives and allowances
survival pricing objective
adjust price levels so the firm can increase sales volume to match organizational expenses
To increase customer value for a given price, the market must ______.
increase perceived benefits
standard markup pricing
involves adding a fixed percentage to the cost of all items in a specific product class
According to the price equation, the actual price is the ________ price less incentives and allowances, plus extra fees.
list
skimming pricing
setting the highest initial price that customers really desiring the product are willing to pay
In ________, prices are lowered in a series of steps with the demand by those who really desire the product being satisfied at the highest prices.
skimming pricing
Consumers' zeal for low prices combined with the ease of making price comparisons on the Internet has resulted in many companies adding ________ to their list prices.
surcharges
these four conditions seen in skimming pricing exist when
the new product is protected by patents, copiyrights, or uniqueness
price lining
the practice of offering a product line with several items at specific price points
value pricing
the practice of simultaneously increasing product and service benefits while maintaining or decreasing price
To determine ______ for a product, you must consider limitations based on customers, actual costs, and profits.
the price
loss-leader pricing
the pricing policy of setting prices very low or even below cost to attract customers into a store
To many consumers, price provides information about ______.
the quality of the product
small changes in price have big effects on what
units sold and company profit
