Chapter 9: Pricing

Market Penetration Pricing

setting a low price for a new product in order to attract a large number of buyers and a large market share

Pure Competition

the market consists of many buyers and sellers trading a uniform commodity

Monopolistic Competition

the market consists of many buyers and sellers trading over a range of prices rather than a single market price

Value Added Pricing

attaching value added features and services to differentiate a company's offers and charging higher prices

Geographical Pricing

setting prices for customers located in different parts of the country or world

Oligopolistic Competition

the market consists of only a few large sellers

Pure Monopoly

the market is dominated by one seller

Companies have to think carefully when considering price changes. They must consider which of the following? a. buyer and competitor reactions b. investor reactions c. management reactions d. sales and marketing reactions e. research and development reactions

a. buyer and competitor reactions

Product Bundle Pricing

combining several products and offering the bundle at a reduced cost

Optional Product Pricing

pricing of optional or accessory products along with the main product

Segmented Pricing

selling a product or service at two or more prices, where the differences in prices is not based on differences in cost

Total Costs

the sum of fixed and variable costs for any given level of production

Variable Costs

vary directly with the level of production

Cost Plus Pricing (Markup Pricing)

adding a standard markup to the cost of the product

Target Costing

pricing that starts with an ideal selling price, then target costs that will ensure that the price it met

Discount

a straight reduction in price on purchases during a stated period of time or larger quantities

Dynamic Pricing

adjusting prices continually to meet the characteristics and needs of individual customers and situations

Fixed Costs (Overhead)

costs that do not vary with production or sales level

Everyday Low Pricing (EDLP)

involves charging a constant, everyday low price with few or temporary price discounts

Customer Value Based Pricing

setting price based on buyers' perceptions of value rather than on seller's cost

Break Even Pricing

setting price to break even on the costs of making and marketing a product or setting price to make a target return

Price Elasticity

a measure of the sensitivity of demand to changes in price

Of the following, which is core element of our free market economy? a. cost controls b. price competition c. free trade d. uniform pricing regulations e. price cuts

b. price competition

Good Value Pricing

offering just the right combination of quality and good service at a fair price

Demand Curve

shows the number of units the market will buy in a given time period, at different prices that might be charged

When companies treat customers fairly and make certain they understand pricing and pricing terms, this leads to ________ a. greater perceived value on the customer's part b. building strong and lasting customer relationships c. a pathway for the acceptance of future price increases d. fewer returns and refunds e. enhanced profitability

b. building strong and lasting customer relationships

Product Line Pricing

setting the price steps between various products in a product line based on cost differences between products, customer evaluations of different features, and competitors' prices

Promotional Pricing

temporary pricing products below the list price, and sometimes even below cost, to increase short run sales

Competition Based Pricing

setting prices based on competitors' strategies, prices, costs, and market offerings

Cost Based Pricing

setting prices based on the costs of producing, distributing, and selling the product plus a fair rate of return for effort and risk

A company sets a high price on a new product it introduces to maximize revenue from various market segments. Which new product pricing strategy is the company using? a. captive product pricing b. market skimming pricing c. market penetration pricing d. product line pricing e. product bundle pricing

b. market skimming pricing

Marketers must consider external considerations in establishing pricing. Which of the following represents those external considerations? a. demand, market strategy, and the effect of reseller actions b. the nature of the market and demand and other environmental factors c. the nature of the market and environmental factors d. market strategy, environmental factors, and distribution channels e. demand, revenue objectives, and stakeholder requirements

b. the nature of the market and demand and other environmental factors

Price ceilings are set by customer perception. Which of the following sets the floor for the price that a company charges? a. market conditions b. revenue projections c. costs d. competitors e. customers

c. costs

How do companies apply pricing strategies to accommodate differences in customer segments and situations? a. they create price allowance pricing strategies b. they focus on segmented pricing strategies c. they apply a variety of price adjustment strategies d. they use accommodations such as preferred pricing strategies e. they use selective promotional pricing strategies

c. they apply a variety of price adjustment strategies

Marketers use three major pricing strategies: _________________ a. customer value based pricing, cost based pricing, and revenue based pricing b. customer value based pricing, cost based pricing, and government based pricing c. demand based pricing, cost based pricing, and competition based pricing d. customer value based pricing, cost based pricing, and competition based pricing e. demand based pricing, revenue based pricing, and government based pricing

d. customer value based pricing, cost based pricing, and competition based pricing

Which of the following pricing strategies would a company use to attract a large number of buyers quickly and win a large market share? a. market skimming pricing b. captive product pricing c. optional product pricing d. market penetration pricing e. by product pricing

d. market penetration pricing

A company's pricing strategy is affected by internal factors such as ________ a. overall marketing strategy, objectives, demand, and international considerations b. overall marketing strategy, the nature of the market, and demand c. the nature of the market, demand, and the economy d. overall marketing strategy, objectives, marketing mix, and other organizational considerations e. overall marketing strategy, objectives, and market conditions

d. overall marketing strategy, objectives, marketing mix, and other organizational considerations

Of the following, which is NOT one of the product mix pricing situations? a. product bundle pricing b. product line pricing c. optional product pricing d. captive product pricing e. penetration pricing

e. penetration pricing

When Microsoft or Apple sells software as a package, it is engaging in what type of pricing? a. product line pricing b. by product pricing c. two part product pricing d. captive product pricing e. product bundle pricing

e. product bundle pricing

Reference Prices

prices that buyers carry in their minds and refer to when they look at a given product

Psychological Pricing

pricing that considers the psychology of prices and not simply the economics; the price is used to say something about the product

Allowances

promotional money paid by manufacturers to retailers in return for an agreement to feature the manufacturers' products in some way

Market Skimming Pricing (Price Skimming)

setting a high price for a 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

By Product Pricing

setting a price for by products to help offset the costs of disposing of them and help make the main products' price more competitive

Captive Product Pricing

setting a price for products that must be used along with a main product, such as blades for a razor or games for a video game console