Ch. 12 - Pricing Products and Services

Value-Based Pricing

A method of setting prices based on the perceived value that the consumer receives from the product or service

Dynamic Pricing

A pricing strategy in which a variable rate is used for each customer, often based on the product or service's demand

Loss Leader

A pricing strategy where a company chooses to sell a popular item at an artificially low price, often below the company's product cost, to attract people to the store

Price Skimming

A strategy in which a marketer introduces a product into the market at an initial high price and then incrementally lowers the price over time

Which one of these companies would be an example of using the price skimming strategy?

Apple

True or False: Price skimming is when a marketer introduces a product into the market at an initially low price then incrementally raises the price over time

False

_____ are the costs associated with the operating and marketing expenses of a company. _____ are the per-unit costs associated with the product.

Fixed costs; Variable costs

A company uses the _____ pricing strategy when it sells a popular item at an artificially low price.

Loss Leader

Prestige Pricing

Setting a high price so that the product will be considered elite, and so that status-seeking customers will want to buy it

True or False: Dan Ariely describes a phenomenon he discovered called the third "decoy" option, which says adding an inferior option will make the original product more attractive.

True

True or False: With prestige pricing, elasticity in demand can be a positive number. This means when the price goes up, instead of demand decreasing, demand actually

True

_____ is packaging two or more goods or services together to sell them for a single packaged price.

Bundle pricing

With _____ pricing, a variable rate is used for each customer, often based on a product's or a service's demand.

Dynamic

What is an added percentage or dollar amount added to the cost to determine its selling price?

Markup

The formula, Percent Change in Quantity Sold divided by Percent Change in Price, is used to calculate which pricing concept?

Price elasticity