MKTG 345 - Chapter 11

price premium %

(Dollar Sales ($) Market Share for Brand / Unit Volume # Market Share for a Brand) - 1

Target

(TR-TC)/TR

elastic demand

1% decrease in price yields +1% in demand

inelastic demand

1% decrease in price yields -1% in demand

demand factors

1. consumer tastes 2. price and availability of similar products 3. consumer income

Setting a final price

1. select an approximate price level 2. set the list or quoted price 3. make special adjustments to the list or quoted price

________-oriented approaches to pricing set the price to reflect the way the marketer wants consumers to interpret prices relative to competitor's offerings.

Competition

Select all of the following that are common approaches to setting an approximate price level for a product.

Competition-oriented Demand-oriented Cost-oriented

A pricing constraint firms face is the price that its _________ are currently charging and likely to charge in the future.

Competitors

target pricing

Consists of (1) estimating the price that ultimate consumers would be willing to pay for a product, (2) working backward through markups taken by retailers and wholesalers to determine what price to charge wholesalers, and then (3) deliberately adjusting the composition and features of the product to achieve the target price to consumers.

The Internet has resulted in which two of the following that affect the competitive environment for pricing?

Consumers' access to pricing information from many competitors Companies' ability to change prices frequently

Price deals that mislead consumers fall into the category of _____ pricing

Deceptive

Demand-oriented pricing approaches weigh which factors most heavily?

Expected customer tastes and preferences

TC

FC+VC

BEP

FC/(P-UVC)

Demand-oriented

Factors underlying customer tastes and preferences are weighed most heavily. new energy efficient light bulb was introduced at $3.00 (about three times the price of a conventional bulb) and will last 6,000 hours (about four times the conventional bulb).A new energy efficient light bulb was introduced at $3.00 (about three times the price of a conventional bulb) and will last 6,000 hours (about four times the conventional bulb).

TR

P x Q

When using ____ pricing, a firm sets a very low price for one or more of its products with the specific intent to drive its competition out of business

Predatory

Which of the following are pricing practices that are legally restricted?

Predatory pricing Price fixing

Cost-oriented

Price is set by looking at the production and marketing costs, and then adding enough to cover direct expenses, overhead, and profit. Target priced its new patio furniture sets by adding 15 percent to the invoice price it paid for those products.

Competition-oriented

Price setter stresses what "the market" is doing is determining a price. Intel slashed its prices to be more similar to those of AMD, a rival computer chip maker.

Cost-oriented approaches to pricing considers which of the following in the setting of a product's price?

Profit Overhead Manufacturing costs

Reductions in unit costs for a larger order are known as ____ discounts.

Quantity

Profit

TR-TC

Target Profit (P)

TR-TC (PXQ) -[(FC+UVCXQ)]

Which of the following are profit-oriented approaches to setting a price?

Target profit pricing Target return pricing

Profit-oriented

The price setter balances both revenues and costs to set a price. The owner of a vacuum cleaner store sets a target of a 20 percent return on sales.

For _______ discounts, reductions off the list price are offered to resellers in the marketing channel on the basis of where they are in the channel and the marketing activities they are expected to perform in the future.

Trade

_______ discounts are also known as functional discounts.

Trade

UVC

VC/Q

Which of the following are essential to consider when setting a price?

What will provide a profit to the company? What will pay for all associated costs, including marketing? What are customers willing to pay?

Marketing managers may identify profit, market share, social responsibility, or even survival as pricing

`objectives.

demand curve

a graph that relates the quantity sold and price, showing the max number of units that will be sold at a given price

break-even analysis

a technique that analyzes the relationship between total revenue and total cost to determine profitability at various levels of output

standard market pricing

adding a fixed percentage to the cost of all items in a specific product class

A one-price policy means there is one price for

all buyers of the product.

Demand-oriented, cost-oriented, and profit-oriented approaches can be used to set a(n) ________ price level for a product.

approximate

Break-even analysis analyzes the relationship between total revenue and total cost to determine profitability

at various levels of output.

___-____ analysis is a technique that analyzes the relationship between total revenue and total cost to determine profitability at various levels of output. (one word each blank)

break-even

Legal and regulatory issues and consumer demand are pricing ________ that limit what a company can charge for its products.

constraints

The demand for a product class, a product, or a brand, or the newness of a product can act as pricing ________ to limit a firm's options.

constraints

Pricing approaches that consider the production and marketing costs and then add enough to cover direct expenses, overhead, and profit are known as

cost-oriented.

loss-leader pricing

deliberately selling a product below its customary price, not to increase sales, but to attract customers' attention to it in hopes that they will buy other products with large markups as well

________-oriented approaches to pricing regard expected customer tastes and preferences as the most important factors in the decision.

demand

Four approaches for selecting an approximate price level

demand-oriented, cost-oriented, profit-oriented, competition - oriented approaches

When using predatory pricing, a firm sets a very low price for one or more of its products in order to

drive its competition out of business.

Price _____ of demand is a measure of how sensitive consumer demand and the firm's revenues are to changes in the product's price. (one word)

elasticity

pricing constraints

factors that limit the range of prices a firm may set - demand for the product class, product group, and brand - newness of the product: stage in the product life cycle - cost of producing and marketing the product - competitors' prices

BEP

fixed cost / (unit price - unit variable cost)

value pricing

increasing product/service benefits while maintaining or decreasing price

customary pricing

involves setting a price that is dictated by tradition, a standardized channel of distribution, or other competitive factors.

cost - plus pricing

involves summing the total unit cost of providing a product or service and adding a specific amount to the cost to arrive at a price

yield management pricing

involves the charging of different prices to maximize revenue for a set amount of capacity at any given time

Price fixing, price discrimination, and predatory pricing are

legally prohibited.

On a demand curve, one of the axes represents the price of a product while the other represents the

maximum units sold.

Price deals that ________ fall into the category of deceptive pricing.

mislead consumers

A marketing manager considers pricing objectives and constraints to

narrow the range of choices among the variety of pricing strategies.

Pricing ________ involve specifying the role of price in an organization's marketing and strategic plans.

objectives

Pricing ________ frequently reflect corporate goals, while pricing ________ often relate to conditions existing in the marketplace.

objectives; constraints

Setting a price with no variation for product buyers is called a ________ policy.

one-price

Value is defined as

perceived benefits divided by price.

value =

perceived benefits/price

price elasticity of demand (E)

percentage change in quantity demanded/percent change in price

When using ____ pricing, a firm sets a very low price for one or more of its products with the specific intent to drive its competition out of business.

predatory

Proving the practice of ________ is difficult because it must be shown that there was an explicit attempt to destroy a competitor with the use of a low price.

predatory pricing

The money or other consideration (including other products and services) exchanged for the ownership or use of a product is known as

price

legal and ethical considerations

price fixing, price discrimination, deceptive pricing, predatory pricing

Total revenue = unit _____ x quantity ______

price; sold

profit equation

profit = total revenue - total cost = (unit price x quantity sold) - (fixed cost + variable cost)

By focusing on target profit pricing or target return pricing, a firm is using a ________ pricing approach.

profit-oriented

Total revenue minus total cost is known as

profit.

Price elasticity of demand is expressed as percentage change in ________ divided by the percentage change in ________.

quantity demanded; price

Cumulative and noncumulative are the two general kinds of

quantity discounts.

The firm's goal in offering a trade discount is to

reward wholesalers and retailers for marketing functions.

prestige pricing

setting a high price so that quality or status conscious consumers will be attracted to the product and buy it

penetration pricing

setting a low initial price on a new product to appeal immediately to the mass market

above-, at-, or below- market pricing

setting a market price for a product or product class based on a subjective feel for the competitors' price or market price as the benchmark

target return on sales pricing

setting a price to achieve a profit that is a specified percentage of the sales volume

target return on investment pricing

setting a price to achieve an annual target return on investment

target profit pricing

setting an annual target of a specific dollar volume of profit

odd-even pricing `

setting prices a few dollars or cents under an even number

skimming price

setting the highest initial price that customers really desiring the product are willing to pay when introducing a new or innovative product

pricing objectives

specifying the role of price in an organization's marketing and strategic plans - profit - sales revenue - market share - unit volume - survival -social responsibilty

bundle pricing

the marketing of two or more products in a single package price

price

the money or other considerations (including other products and services) exchanged for the ownership or use of a product or service Final Price = list price - (incentives + Allowances) + Extra Fees

Price is defined as

the money or other considerations exchanged for the ownership or use of a product.

price elasticity of demand

the percentage change in quantity demand relative to a percentage change in price

To determine ______ for a product, you must consider limitations based on customers, actual costs, and profits.

the price

value

the ratio of perceived benefits to price

total revenue

the total money received from the sales of a product total revenue = price x quantity total profit = total revenue - total cost

total cost

total expense incurred by a firm in producing and marketing a product. total cost is the sum of fixed cost and variable cost

According to the profit equation, profit is

total revenue minus total cost.

Price times quantity sold is

total revenue.

For _______ discounts, reductions off the list price are offered to resellers in the marketing channel on the basis of where they are in the channel and the marketing activities they are expected to perform in the future.

trade

The relationship, or ratio, between a product's perceived benefits and the consumer's costs is known as its

value

When using competition-oriented pricing approaches, price setters stress

what "the market" is doing.