Chapter 9: Pricing
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