Chapter 9: Pricing

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Discount

a cash discount, a price reduction to buyers who pay their bills promptly

Cost-plus pricing

adding a standard markup to the costs of the product

Dynamic pricing

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

Allowances

another type of reduction from the list price

Value-added pricing

attach value-added features and services to differentiate their offers and thus support their higher prices

Market-penetration pricing

companies set a low initial price to penetrate the market quickly and deeply

Captive-product pricing

companies that make products that must be used along with a main product

Promotional pricing

companies will temporarily price their products below list price and sometimes even below cost

Fixed costs

do not vary with production or sales level

Price elasticity

how responsive demand will be to a change in price

Competition-based pricing

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

Cost-based pricing

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

Product-line pricing

management must determine the price steps between the various products in a line

Market-skimming pricing

many companies that invent new products set high initial prices to skim revenue layer by layer from the market

Good-value pricing

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

Optional-product pricing

offering to sell optional or accessory products along with the main product

Reference prices

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

Target-costing

reverses the usual process of first designing a new product, determining its cost, and then asking, "Can we sell it for that?"

Psychological pricing

sellers consider the psychology of prices, not simply the economics

Product-bundle pricing

sellers often combine several products and offer the bundle at a reduced price

Demand curve

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

Price

the amount of money charged for a product or service

By-product pricing

the company seeks a market for these by-products to help offset the costs of disposing of them and help make the price of the main product more competitive

Segmented pricing

the company sells a product or service at two or more prices, even though the differences in prices is not based on difference in costs

Customer value-based pricing

uses

Customer value-based pricing

uses buyers' perceptions of value as the key to pricing

Variable costs

vary directly with the level of production


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