Chapter 19 MKTG
Price Elasticity of demand=
%change in quantity demanded/ % change in price
Profit=
(price X quantity sold) - total costs
Elastic
A change in price cause an opposite change in total revenue. An increase in price will decrease total revenue, and a decrease in price will increase total revenue.
External Reference Point
A comparison price provided by others, such as retailers or manufacturers. This is the type of reference point that we use when we have less experience with the product. EX: this is when places show the competitors price right next to their products.
Allowance
A concession in price to achieve a desired goal. EX: trade in allowances are price reductions granted for turning in a used item when purchasing a new one.
Demand Curve
A graph of the quantity of products expected to be sold at various prices if other factors remain constant.
Price Elasticity of Demand
A measure of the sensitivity of demand to changes in price
Internal Reference Point
A price developed in the buyer's mind through experience with the product. It reflects the belief whether a product should cost a certain amount.
F.O.B Destination
A price indicating the producer is absorbing some shipping costs
Seasonal Discount
A price reduction given to buyers for purchasing goods or services out of season.
Cash Discount
A price reduction given to buyers to prompt payment or cash payment
Trade (functional) discount
A reduction off the list price a producer gives to an intermediary for performing certain functions
Cost Plus Investment
Calculated at full cost plus, the cost of a portion of the selling unit's assets used for internal needs .
Market-based cost
Calculated at the market price less a small discount to reflect the lack of sales effort and other expenses.
Standard Full Cost
Calculated based on what it would cost to produce the goods at full plant capacity
Actual Full Cost
Calculated by dividing all fixed and variable expenses for a period into the number of units produced.
Uniform Geographic Pricing
Charging all customers the same price, regardless of geographic location. Paper products and office equipment are often priced on a uniform basis.
Value Conscious
Concerned about price and quality of a product
Fixed Costs
Costs that do not vary with changes in the number of units produced or sold
Variable Costs
Costs that vary directly with changes in the number of units produced or sold.
What are the 2 types of quantity discounts?
Cumulative or Non cumulative
Quantity discounts
Deductions from the list price fro purchasing in large quantities. Quantity discounts are used in many industries and pass on the buyer cost savings gained through economies of scale.
Prestige Sensitive
Drawn to products that signify prominence and status
Price Competition
Emphasizing a price as an issue and matching or beating competitor's prices
NonPrice Competition
Emphasizing factors other than price to distinguish a product from competing brands. A major advantage of nonprice competition is that a firm can build customer loyalty toward its brand.
Price Discrimination
Employing price differentials that injure competition by giving one or more buyers a competitive advantage
Breakeven point=
Fixed costs/ per-unit contribution to fixed costs( AKA: price - variable costs)
Base-point Pricing
Geographic pricing that combines factory price and freight charges from the base point to the nearest buyer.
Non cumulative discounts
One time price reductions based on the number of units purchased, the dollar value of the order, or the product mix purchased
Transfer Pricing
Prices charged in sales between an organization's units
Freight Absorbing Pricing
Prices charged in sales between the organizations units.
Zone Pricing
Pricing based on transportation costs within major geographic zones.
Cumulative Discounts
Quantity discounts aggregated over a stated period of time.
Geographic Pricing
Reductions for transportation and other costs related to the physical distance between the buyer and the seller.
Price Conscious
Striving to pay low prices
Marginal Revenue
The change in total revenue resulting from the sale of an additional unit of a product
Marginal Cost
The extra cost incurred by producing one more unit of a product
Average Fixed Costs
The fixed cost per unit produced
Break Even Point
The point at which the costs of producing a product equal the revenue made from selling the product
F.O.B Factory
The price merchandise at the factory before shipment
Total Cost
The sum of average fixed and average variable costs times the quantity produced
Average Total Cost
The sum of the average fixed cost and the average variable cost
Barter
The trading of products. This is the oldest form of exchange.
Average Variable Costs
The variable cost per unit produced.
Inelastic
a change in price causes a change in the same direction for total revenue. An increase in price will increase total revenue, and a decrease in price will decrease total revenue.
Marginal Analysis
examines what happens to a firm's costs and revenues when production (or sales volume) changes by one unit.
Interpretation
refers to what the price means or what it communicates to customers
Response
refers to whether the price will move customers closer to purchase of the product and the degree to which the price enhances their satisfaction with the purchase experience and with the product after purchase.
Price
the value paid for a product in a marketing exchange
Profit=
total revenue - total costs
