Chapter 9

target return pricing

A variation of​ break-even pricing is​ ____________________, which uses the concept of a​ break-even chart that shows the total cost and total revenue expected at different sales volume levels.

True

T or F: If demand is elastic, sellers will consider lowering their prices.

product line

The Ford Mustang is offered in several different models. Ford uses​ __________ pricing to determine the price steps between the different models.

price discrimination

The​ Robinson-Patman Act seeks to ensure that sellers offer the same price terms to customers at a given level of trade to prevent​ ______________________.

product costs

What sets the price floor?

premium pricing

When Apple introduced its iPhone​ X, it priced the new product at nearly​ $1,000, considerably higher than competing smart phones. Apple was pursuing a​ ___________________ new product pricing​ strategy.

psychological

When a retailer temporarily prices a few select items below cost to create excitement and pull consumers into the​ store, it is practicing​ ___________________ pricing.

price fixing

When sellers set prices in conjunction or collaboration with one​ another, this illegal practice is known as​ _______________.

target costing

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

Consumer Perceptions of Value

Who sets the price ceiling?

Price: (narrow definition)

amount of money charged for a product or service

Value Based Pricing:

means that the marketer cannot design a product and marketing program and then set the price

by product pricing

setting a price for by-products to help offset the costs of disposing of them and help make the main product's price more competitive.

Cost Plus Pricing

simplest pricing method, adding a standard markup to the cost of the product

price

the only element in the mix that produces revenue, and one of the most flexible marketing mix elements

functional discount

· (also known as a trade discount) trade channel-members who perform certain functions, such as selling, storing and record keeping.

variable costs

· costs that vary directly with the level of production

market penetration

· setting a low price for a new product in order to attract a large number of buyers and a large market share

quantity discount

· price reduction to buyers who buy large volumes.

fixed cost

(overhead) costs that do not vary with production or sales level

good value pricing

Sadie's Restaurant has listened to its customers over the years and is now able to offer the right combination of quality and good service at a fair price. Which pricing strategy is​ Sadie's using?

location based pricing

When a college or university charges more for​ out-of-state students than​ in-state students, it is practicing​ ______________________.

promotional pricing

When a retailer temporarily prices a few select items below cost to create excitement and pull consumers into the​ store, it is practicing​ ___________________ pricing.

winning large market share

________________________ is one major objective associated with a​ market-penetration pricing strategy.

demand curve

a curve that shows the number of units the market will buy in a given time period at different prices might be changed, normal (price and demand are inversely related)

product bundle pricing

combining several products and offering the bundle at a reduced price. (ex: restaurants bundle a burger, fries, and soft drink at a "combo" price. Microsoft Office is sold at a bundle of software including Word, Excel, PowerPoint, and Outlook.)

market penetration

companies set a low initial price to penetrate the market quickly and deeply- to attract a large number of buyers quickly and win a large market share.

optional product pricing

the pricing of optional or accessory products along with a main product. (ex: A car buyer may choose to order a navigation system and premium entertainment systems. Refrigerators come with optional ice makers.)

Price: (broad definition)

the sum of all the values that customers give up to gain the benefits of having or using a product or service

total costs

the sum of the fixed and variable costs for any given level of production

by product pricing

type of pricing · (ex: Cheesemakers in Wisconsin have discovered a use for their leftover brine, a salt solution used in the cheese-making process. Instead of paying to have it disposed of, they now sell it to melt icy roads, to local and city highway departments.)

Pure Monopoly

· The market is dominated by one sellers. The seller may be a government, or a private regulated (power company) or a private unregulated (ex: De Beers and Dimaonds). Pricing is handled differently in each case.

Dynamic Pricing:

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

Promotional Allowances

· payments or price reductions that reward dealers for participating in advertising and sales-support programs.

seasonal discount

· price reduction to buyers who buy merchandise or services out of season

trade in allowances

· price reductions given for turning in an old item when buying a new one, most common to the automobile industry, but they are also given for other durable goods.

Competition Based Pricing:

· pricing method that involves setting prices based on competitors' strategies, prices, costs, and market offerings. Consumers will base their judgements of a product's value on the prices that competitors charge for similar products.

Customer Value- Based Pricing:

· pricing method that is setting prices based on buyers' perceptions of value rather than cost

Psychological Pricing:

· pricing that considers the psychology of prices and not simply the economics; the price is used to say something about the product.

Segmented Pricing:

· selling a product or service at two or more prices, where the difference in prices is not based on differences in costs.

Market-Skimming Pricing (price skimming):

· setting a high price for a new product to skim maximum revenues layer by layer from the segments willing to pay the high price; the company makes fewer but more profitable sales.

Captive-product pricing:

· setting a price for products that must be used along with a main product. (ex: blades for a razor and games for a video-game console, printer cartridges, single-serve coffee pods, and e-books)

product line pricing

· setting the price steps between various products in a product line based on cost differences between the products, customer evaluations of different features, and competitors' prices. -(ex: Inuit offers an entire line of Wuicken financial management software versions, including Starter, Deluxe, Premier, and Home and Business verisions priced at 59.99, 89.99, 129.99, and 159.99)

pure competition

· the market consists of many buyers and sellers trading in a uniform commodity (ex: wheat, copper, or financial securities), no single buyer or seller has much effect on the going market price.

Oligopolistic Competition:

· the market only consists of only a few large sellers. Because there are few sellers, each seller is alert and responsive to competitors' pricing strategies and marketing moves.

monopolistic competition

·the market consists of many buyers and sellers trading over a range of prices rather a single market price, A range of prices occurs because sellers can differentiate their offers to buyers