MKT- Chapter 14
target return on sales
=target profit/total revenue
dynamic
A ____ pricing policy gives sellers considerable discretion in setting the final price in light of demand, cost, and competitive factors
price fixing
A conspiracy among firms to set prices for a product
penetration
A firm using ____ pricing may (1) maintain the initial price for a time to gain profit lost from its low introductory level or (2) lower the price further, counting on the new volume to generate the necessary profit.
experience curve pricing
A method of pricing based on the learning effect, which holds that the unit cost of many products and services declines by 10 percent to 30 percent each time a firm's experience at producing and selling them doubles
delivered
Although they go by various names, there are four kinds of ___ pricing methods: (1) single-zone pricing, (2) multiple-zone pricing, (3) FOB with freight-allowed pricing, and (4) basing-point pricing.
larger
Behavioral research suggests that the price differentials should get _____ as one moves up the product line
price premium
Companies use a ____ _____ to assess whether their products and brands are above, at, or below the market
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
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.
discounts
Four kinds of _____ are especially important in marketing strategy: (1) quantity, (2) seasonal, (3) trade (functional), and (4) cash
single zone
In ___ ____ pricing, all buyers pay the same delivered price for the products, regardless of their distance from the seller. So, although a retail store offering free delivery in a metropolitan area incurs varying transportation costs depending on a customer's location in relation to the store, all customers pay the same delivered price.
dynamic pricing
It continually adjusts prices in response to changes in its own costs, competitive pressures, and demand from customers, from one segment of the personal computer market to another
uniformed delivered pricing
It is quoted in a contract as "FOB buyer's location," and the seller selects the mode of transportation, pays the freight charges, and is responsible for any damage that may occur because the seller retains title to the goods until they are delivered to the buyer
below market pricing
Manufacturers and retailers that offer private brands of products ranging from peanut butter to shampoo deliberately set prices for these products about 8 to 10 percent below the prices of nationally branded competitive products such as Skippy peanut butter and Vidal Sassoon shampoo. This is an example of ___ _____ _____
price cutting
Marketers are advised to consider ____ ____ only when one or more conditions exist: (1) the company has a cost or technological advantage over its competitors, (2) primary demand for a product class will grow if prices are lowered, and (3) the price cut is confined to specific products or customers (as with airline tickets) and is not across the board
fixed
Most companies use a ____ price policy.
deceptive
Price deals that mislead consumers is known as ____ pricing
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
customary pricing
Setting a price that is dictated by tradition, a standardized channel of distribution, or other competitive factors
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 (ROI).
target profit pricing
Setting an annual target of a specific dollar volume of profit
price lining
Setting the price of a line of products at a number of different specific pricing points
discounts
Special Adjustment To List or Quoted Price: quantity: cumulative, noncumulative; seasonal; trade (functional); cash
geographical adjustments
Special Adjustment to List or Quoted Price: FOB origin pricing; uniformed delivered pricing: single zone pricing, multiple zone pricing, FOB with freight-allowed pricing, basing-point pricing
allowances
Special Adjustment to List or Quoted Price: trade-in; promotional
FOB origin pricing
The "free on board" (FOB) price the seller quotes that includes only the cost of loading the product onto the vehicle and specifies the name of the location where the loading is to occur (seller's factory or warehouse)
lowest
The ____ priced item in product line pricing is the traffic builder designed to capture the attention of the hesitant or first-time buyer
highest
The ____ priced item in product line pricing is typically positioned as the premium item in quality and features
penetration
The conditions favoring ____ pricing are the reverse of those supporting skimming pricing: (1) many segments of the market are price sensitive, (2) a low initial price discourages competitors from entering the market, and (3) unit production and marketing costs fall dramatically as production volumes increase
product line pricing
The setting of prices for all items in a product line to cover the total cost and produce a profit for the complete line, not necessarily for each item
rule of reason
This rule holds that circumstances surrounding a practice must be considered before making a judgment about its legality.
discounts, allowances, geographical
Three special adjustments to the list or quoted price are (1) _______, (2) _____, and (3) _____ adjustments
seasonal
To encourage buyers to stock inventory earlier than their normal demand would require, manufacturers often use _____ discounts
cash
To encourage retailers to pay their bills quickly, manufacturers offer them _____ discounts.
trade
To reward wholesalers and retailers for marketing functions they will perform in the future, a manufacturer often gives _____, or functional, discounts. These reductions off the list or base price are offered to resellers in the marketing channel on the basis of (1) where they are in the channel and (2) the marketing activities they are expected to perform in the future
customize
Today, many marketers have the ability to _____ a price for an individual on the basis of his or her purchasing patterns, product preferences, and price sensitivity, all of which are stored in company data warehouses
marginal analysis
When a price is changed or new advertising or personal selling programs are planned, their effect on the quantity sold must be considered
horizontal
When two or more competitors explicitly or implicitly set prices, this practice is called ____ price fixing
dynamic
Yield management pricing is a form of ____ pricing because prices vary by an individual buyer's purchase situation, company cost considerations, and competitive conditions
basing point
____ ___ pricing can be viewed as illegal under the Robinson-Patman Act and the Federal Trade Commission Act if there is clear-cut evidence of a conspiracy to set prices
trade in
____ ____ allowance is a price reduction given when a used product is accepted as part of the payment on a new product. These are an effective way to lower the price a buyer has to pay without formally reducing the list price.
below market
____ ____ pricing exists in business-to-business marketing
product line
____ ____ pricing involves determining (1) the lowest-priced product and price, (2) the highest-priced product and price, and (3) price differentials for all other products in the line.22 The lowest- and highest-priced items in the product line play important roles
vertical
____ price fixing involves controlling agreements between independent buyers and sellers (a manufacturer and a retailer) whereby sellers are required to not sell products below a minimum retail price.
cost-plus
____-_____ pricing is the most commonly used method to set prices for business products
quantity
_____ discounts are of two general kinds: noncumulative and cumulative
skimming
_____ pricing is effective when (1) enough prospective customers are willing to buy the product immediately at the high initial price to make these sales profitable, (2) the high initial price will not attract competitors, (3) lowering price has only a minor effect on increasing the sales volume and reducing the unit costs, and (4) customers interpret the high price as signifying high quality
cumulative
_____ quantity discounts apply to the accumulation of purchases of a product over a given time period, typically a year; encourage repeat buying by a single customer to a far greater degree than do noncumulative quantity discounts
noncumulative
_____ quantity discounts are based on the size of an individual purchase order. They encourage large individual purchase orders, not a series of orders
promotional
______ allowances are cash payments or an extra amount of "free goods" awarded sellers in the marketing channel for undertaking certain advertising or selling activities to promote a product
dynamic
______ pricing has grown in popularity because of increasingly sophisticated information technology
dynamic
_______ pricing means that some customers pay more and others pay less for the same product or service.
comparisons with suggested prices
a claim that a price is below a manufacturer's suggested or listed price may be deceptive if few or no sales occur at that price in a retailer's market area
below
a number of firms use ____ market pricing
standard markup pricing
adding a fixed percentage to the cost of all items in a specific product class
comparable value comparisons
advertising such as "retail value $100, our price $85" is deceptive if a verified number of stores in the market area do not price the item as $100
dynamic pricing policy
also called a flexible-price policy; involves setting different prices for products and services in real time in response to supply and demand conditions.
fixed priced policy
also called a one-price policy; setting one price for all buyers of a product or service
FOB with freight allowed pricing
also called freight absorption pricing; the price is quoted by the seller as "FOB plant—freight allowed." The buyer is allowed to deduct freight expenses from the list price of the goods, so the seller agrees to pay, or "absorb," the transportation costs.
percentage-of-cost
cost-plus _____-__-____ pricing, a fixed percentage is added to the total unit cost. This is often used to price one- or few-of-a-kind items
fixed-fee
cost-plus fixed-fee pricing, which means that a supplier is reimbursed for all costs, regardless of what they turn out to be, but is allowed only a fixed fee as profit that is independent of the final cost of the project
competition-oriented approaches
customary; above, at, or below market; loss leader
skimming pricing
customers are not very price sensitive because they weigh the new product's price, quality, and ability to satisfy their needs against the same characteristics of substitutes; As the demand of these customers is satisfied, the firm lowers the price to attract another, more price-sensitive segment
multiple zone
in ___ ___pricing, a firm divides its selling territory into geographic areas or zones. The delivered price to all buyers within any one zone is the same, but prices across zones vary depending on the transportation cost to each particular zone and the level of competition and demand within each zone
allowances
reductions from list or quoted prices to buyers for performing some activity. They include trade-in and promotional
discounts
reductions from the list price that a seller gives a buyer as a reward for some activity of the buyer that is favorable to the seller
quantity discounts
reductions in unit costs for a larger order.
basing-point pricing
selecting one or more geographical locations (basing point) from which the list price for products plus freight expenses are charged to the buyer.
prestige pricing
setting a high price so that quality- or status-conscious consumers will be attracted to the product and buy it
odd-even pricing
setting prices a few dollars or cents under an even number
skimming pricing
setting the highest initial price that customers who really desire the product are willing to pay when firms introduce a new or innovative product
demand-oriented approaches
skimming, penetration, prestige, price lining, odd-even, target, bundle, yield management
cost-oriented approaches
standard markup, cost-plus, experience curve
price war
successive price cutting by competitors to increase or maintain their unit sales or market share
cost-plus pricing
summing the total unit cost of providing a product or service and adding a specific amount to the cost to arrive at a price
profit-oriented approaches
target profit, target return on sales, target return on investment
yield management pricing
the charging of different prices to maximize revenue for a set amount of capacity at any given time
bundle pricing
the marketing of two or more products in a single package price
predatory pricing
the practice of charging a very low price for a product with the intent of driving competitors out of business; Once competitors have been driven out, the firm raises its prices.
price discrimination
the practice of charging different prices to different buyers for goods of like grade and quality
every day low pricing (EDLP)
the practice of replacing promotional allowances with lower manufacturer list prices; promises to reduce the average price to consumers while minimizing promotional allowances that cost manufacturers billions of dollars every year
uniformed delivered pricing
the price the seller quotes includes all transportation costs
clickstream
the way that person navigates through the website
geographical adjustments
to list or quoted prices are made by manufacturers or even wholesalers to reflect the cost of transportation of the products from seller to buyer
bargains conditional on other purchases
when a buyer is offered 1-cent sales, buy 1 get 1 free, and get 2 for the price of 1; price is deceptive if inflated for the promotion or lower quality products are substituted
bait and switch
when a firm offers a very low price on a product (the bait) to attract customers to a store. once in the store the customer is persuaded a higher priced item (the switch) using a variety of tricks including (1) downgrading the promoted item, (2) not having the item in stock, (3) refusing to take an order for the item
former price comparisons
when a seller represents a price as reduced, the item must have been offered in good faith at a higher price for a substantial previous period; setting a high price for the purpose of establishing a reference for a price reduction is considered to be deceptive
