Chapter 19 MKTG

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Price Elasticity of demand=

%change in quantity demanded/ % change in price

Profit=

(price X quantity sold) - total costs

Elastic

A change in price cause an opposite change in total revenue. An increase in price will decrease total revenue, and a decrease in price will increase total revenue.

External Reference Point

A comparison price provided by others, such as retailers or manufacturers. This is the type of reference point that we use when we have less experience with the product. EX: this is when places show the competitors price right next to their products.

Allowance

A concession in price to achieve a desired goal. EX: trade in allowances are price reductions granted for turning in a used item when purchasing a new one.

Demand Curve

A graph of the quantity of products expected to be sold at various prices if other factors remain constant.

Price Elasticity of Demand

A measure of the sensitivity of demand to changes in price

Internal Reference Point

A price developed in the buyer's mind through experience with the product. It reflects the belief whether a product should cost a certain amount.

F.O.B Destination

A price indicating the producer is absorbing some shipping costs

Seasonal Discount

A price reduction given to buyers for purchasing goods or services out of season.

Cash Discount

A price reduction given to buyers to prompt payment or cash payment

Trade (functional) discount

A reduction off the list price a producer gives to an intermediary for performing certain functions

Cost Plus Investment

Calculated at full cost plus, the cost of a portion of the selling unit's assets used for internal needs .

Market-based cost

Calculated at the market price less a small discount to reflect the lack of sales effort and other expenses.

Standard Full Cost

Calculated based on what it would cost to produce the goods at full plant capacity

Actual Full Cost

Calculated by dividing all fixed and variable expenses for a period into the number of units produced.

Uniform Geographic Pricing

Charging all customers the same price, regardless of geographic location. Paper products and office equipment are often priced on a uniform basis.

Value Conscious

Concerned about price and quality of a product

Fixed Costs

Costs that do not vary with changes in the number of units produced or sold

Variable Costs

Costs that vary directly with changes in the number of units produced or sold.

What are the 2 types of quantity discounts?

Cumulative or Non cumulative

Quantity discounts

Deductions from the list price fro purchasing in large quantities. Quantity discounts are used in many industries and pass on the buyer cost savings gained through economies of scale.

Prestige Sensitive

Drawn to products that signify prominence and status

Price Competition

Emphasizing a price as an issue and matching or beating competitor's prices

NonPrice Competition

Emphasizing factors other than price to distinguish a product from competing brands. A major advantage of nonprice competition is that a firm can build customer loyalty toward its brand.

Price Discrimination

Employing price differentials that injure competition by giving one or more buyers a competitive advantage

Breakeven point=

Fixed costs/ per-unit contribution to fixed costs( AKA: price - variable costs)

Base-point Pricing

Geographic pricing that combines factory price and freight charges from the base point to the nearest buyer.

Non cumulative discounts

One time price reductions based on the number of units purchased, the dollar value of the order, or the product mix purchased

Transfer Pricing

Prices charged in sales between an organization's units

Freight Absorbing Pricing

Prices charged in sales between the organizations units.

Zone Pricing

Pricing based on transportation costs within major geographic zones.

Cumulative Discounts

Quantity discounts aggregated over a stated period of time.

Geographic Pricing

Reductions for transportation and other costs related to the physical distance between the buyer and the seller.

Price Conscious

Striving to pay low prices

Marginal Revenue

The change in total revenue resulting from the sale of an additional unit of a product

Marginal Cost

The extra cost incurred by producing one more unit of a product

Average Fixed Costs

The fixed cost per unit produced

Break Even Point

The point at which the costs of producing a product equal the revenue made from selling the product

F.O.B Factory

The price merchandise at the factory before shipment

Total Cost

The sum of average fixed and average variable costs times the quantity produced

Average Total Cost

The sum of the average fixed cost and the average variable cost

Barter

The trading of products. This is the oldest form of exchange.

Average Variable Costs

The variable cost per unit produced.

Inelastic

a change in price causes a change in the same direction for total revenue. An increase in price will increase total revenue, and a decrease in price will decrease total revenue.

Marginal Analysis

examines what happens to a firm's costs and revenues when production (or sales volume) changes by one unit.

Interpretation

refers to what the price means or what it communicates to customers

Response

refers to whether the price will move customers closer to purchase of the product and the degree to which the price enhances their satisfaction with the purchase experience and with the product after purchase.

Price

the value paid for a product in a marketing exchange

Profit=

total revenue - total costs


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