Unit 7 Pricing Strategies

gross margin

The _____ is the difference between the cost of the product and the selling price.

Total Revenue

The anticipated quantity of the product that will be sold multiplied by the product's selling price.

FIxed Costs

The costs to the business that do not change no matter now many products are produced.

behaviors

The government attempts to prevent unfair competition by regulating businesses, prohibiting unfair pricing, and using taxation to discourage or encourage certain __.

Everyday Low Pricing

This pricing strategy sets low prices on a consistent basis with no intention of raising them or offering discounts in the future.

Patent

This protects the inventors of a new product from competition for a period of 20 years.

Loss-Leader Pricing

This pricing strategy prices items at cost to attract customers into the store.

tax

An increase in the __ on a product influences how much of a product consumers will purchase.

Encourage

By lowering taxes on alternative fuels, such as ethanol, the government hopes to ___ the use of those products.

rebate

Specific amount of money returned to the customer after the purchase is made.

Total Costs

Fixed and Variable costs combines

taxes

High ____ on tobacco and alcohol products are designed to discourage the purchase of these products

elastic

Steak is not a necessity and has many substitutes. The demand for steak is:

minimum

In order to set and effective price, maximum and __ prices for the product must be determined.

Maximizing Profits

In this objective of pricing, the business will carefully study the target market to determine how much customers will pay for the product.

inelastic

Insulin for a diabetic is a necessity and has no substitutes. The demand for insulin is:

elastic

Most products have ___ demand and will experience a change in demand when the price increases or decreases.

seasonal discounts

Offered to customers who buy during times when normal sales are low.

quantity discounts

Offered to customers who buy in large quantities.

coupons

Price reduction offered by a printed promotional certificate. This is a common sales promotion activity

trade-in allowance

Reduction in price in exchange for the customer's old product when a new one is purchased.

Salt

The law of diminishing marginal utility states that consumers will buy only so much of a given product, even though the price is low. Which of the following products is the BEST example of the Law of Diminishing Utility?

Increasing Market Share

The objective of pricing in which the business wants to have the highest possible sales volume.

price

The patent allows the inventor to have greater control of the ___ charged for the product.

Selling Price

The price at which the product is sold.

Price

The value of money or its equivalent placed on a good or service

Operating Expenses

This are all the costs associated with actual business operations. Examples include buildings, equipment, utilities, salaries, taxes, and other business expenses.

Psychological Pricing

This pricing strategy refers to techniques that create an illusion for customers or that make the product seem to be a better value that it actually is.

Price Lines

This is a pricing strategy where prices are set in distinct categories based on difference in product quality and features. It is often used by cellular services providers and satellite television companies.

Markdown

This is a reduction from the original selling price.

discounts or allowances

This is a reduction in a price given to the customer.

Sales Tax

This is a tax charged on retail sales receipts and added to the selling price by retailers

Multiple-unit Pricing

This pricing strategy involves pricing items in multiples to suggest a bargain and increase sales volume.

Prestige Pricing

This pricing strategy involves setting higher-than-average prices to suggest status and prestige.

Markup

This is an amount added to the cost of a product to determine the selling price.

Bait-and-Switch Pricing

This is an illegal pricing technique that occurs when a business advertises a low priced product with the intention of selling the consumer a higher priced product with the customer visits the store.

Net Profit

This is the difference between the selling price and all costs and operating expenses associated with the product sold.

Price Skimming

This pricing strategy is setting a very high price designed to emphasize the quality or uniqueness of the product.

Breakeven Point

This is the quantity of a product that must be sold for total revenues to match total costs at a specific price.

Seller's market or Shortage

This occurs when there is a small supply of a product (real or perceived) but a very large demand; the price will usually be high.

Buyer's Market or Surplus

This occurs with a large supply of a product exists and the demand is low; the price will also be low.

Penetration Pricing

This price strategy is setting a very low price designed to increase the quantity sold of a product by emphasizing the value.

One Price Policy

This pricing policy means that all customers pay the same price. There is no negotiation concerning the product's price.

Variable Costs

Those costs that are directly related to the quantity of the product produced.

production

To determine the minimum price, all ____, marketing, and administrative costs must be calculated.

Maintaining an Image

With this objective of pricing the business will set a price that will influence how customers view the product. Customers will consider an expensive product to be a high quality product.

Flexible Pricing

With this pricing policy, customers are allowed to negotiate the price of the product.

Special Event Pricing

With this pricing strategy, prices are reduced for a short period of time,

Price Bundling

With this pricing strategy, the price will include a combination of several related services for one price. For example, AT&T might combine high speed internet service, land-line home phone service, wireless cellular service, and television service for one price.