Management Marketing Chapter 10

variable pricing

customers are allowed—even encouraged—to haggle about prices. Ultimately, the price is whatever the buyer and seller agree to—a marked price is nothing more than a starting point for negotiation. For example: cars, boats, houses

captive price

entails gaining a commitment from a customer to a basic product or system that requires continual purchase of peripherals to operate.

one-price strategy

except for temporary price reductions for promotional or clearance purposes, the price marked on a good is what it typically sells for.

deceptive price

false impressions to the customer.

Cost leadership

firms that are able to compete based on some extraordinary efficiency in one or more internal processes bring to the market a competitive advantage based on

stability pricing

a firm attempts to find a neutral set point for price that is neither low enough to raise the ire of competition nor high enough to put the value proposition at risk with customers.

product lining

affords the marketing manager an opportunity to develop a rational pricing strategy across a complete line of related items.

cash discount

are direct, immediate reductions in price provided to purchasers.

discounts

are direct, immediate reductions in price provided to purchasers.

value pricing

attempts to consider the role of price as it reflects the bundle of benefits sought by the customer.

competitor based pricing

This approach might lead the marketing manager to decide to price at some market average price, or perhaps above or below it in the context of penetration or skimming objectives.

high/low pricing

which firms rely on periodic heavy promotional pricing, primarily communicated through advertising and sales promotion, to build traffic and sales volume.

minimum markup law

which require a certain percentage markup be applied to products

seasonal discount

which reward the purchaser for shifting part of the inventory storage function away from the manufacturer.

markup on sales price

which uses the sales price as a basis of calculating the markup percentage.

even pricing

whole-dollar amount For example: $1.99

psychological pricing

creating a perception about price merely from the image the numbers provide the customer.

Market share

is the percentage of total category sales accounted for by a firm.

price points

price points established for the various items in the line need to make sense and reflect the differences in benefits offered as the customer moves up and down the product line.

average cost

All costs 4 Total number of units 5 Average cost of a single unit

reverse auctions

sellers bid prices to capture a buyer's business. For example: Priceline.com

zone pricing

shippers set up geographic pricing zones based on the distance from the shipping location.

old pricing

simply means that the price is not expressed in whole dollars for example:$2.00

price fixing

Companies that collude to set prices at a mutually beneficial high level are engaged in price fixing.

auction pricing

EBay

Price

Price - or more specifically the customer's perception of the offering's pricing - is a key determinant of perceived value.

return on investment

Pricing objectives very frequently are designed for profit maximization,

just noticeable difference

The amount of price increase that can be taken without affecting customer demand

everyday -low price

The rise of Walmart as one of the world's largest corporations has brought the concept of everyday low pricing (EDLP) to the forefront of global consumer consciousness.

target return pricing

To better take into account the differential impact of fixed and variable costs

market penetration

When a firm's objective is to gain as much market share as possible, a likely pricing strategy is penetration pricing

price bundling

When customers are given the opportunity to purchase a package deal at a reduced price compared to what the indivdual components of the package would cost separately

prestige pricing

lending prestige to a product or brand by virtue of a price relatively higher than the competition.

price war

occurs when a company purposefully makes pricing decisions to undercut one or more competitors and gain sales and net market share.

price disrimination

occurs when a seller offers different prices to different customers without a substantive basis, such that competition is reduced

trade or functional discount

provide an incentive to a channel member for performing some function in the channel that benefits the seller.

allowances

remit monies to purchasers after the fact

Marketing skimming

strategy of price skimming addresses the objective of entering a market at a relatively high price point. In proposing price skimming, the marketing manager usually is convinced that a strong price-quality relationship exists for the product.

quantity discount

taken off an invoice price based on different levels of product purchased. For example, offered on an order-by-order basis or they may be offered on a cumulative basis over time as an incentive to promote customer loyalty

FOB shipping

that title transfer and freight paid on the goods being shipped are based on the FOB location.

reference pricing

the reference price is the total price of the components of the bundle if purchased separately versus the bundled price.

uniform delivered price

the same delivery fee is charged to customers regardless of geographic location within the 48 contiguous states. Pricing rates are quoted for other locations, and expedited delivery is generally available for a higher fee.