marketing 3000 lesson 7

functional discount

A ___ ____ (also called a trade discount) is offered by the seller to trade-channel members who perform certain functions, such as selling, storing, and record-keeping.

promotional pricing

Companies using _____ _____ will temporarily price their products below list price and sometimes even below cost to create buying excitement and urgency.

D. penetration pricing

If a firm has a market share objective and demand is elastic, what type of pricing strategy might the firm use? A. price skimming B. flexible pricing C. loss-leader pricing D. penetration pricing E. all of the above

market share objectives

______ _____ _____ are used to increase or maintain market share. They are typically used in a strategic response to specific industry conditions. Survival might supersede profits in the short term given deteriorating economic or industry conditions.

price adjustments

______ _______ are made to the basic price in order to reward customers for certain responses, such as early payments of bills, volume purchases, and offseason buying.

noncumulative quantity discount

A _____ _____ _____ is given for a single purchase (e.g. buy three get one free).

E. All of the above conditions must exist.

For segmented pricing to be an effective strategy, what condition(s) must exist? A. Segments must show different degrees of demand. B. The segmented pricing must be legal. C. The costs of segmenting can't exceed the added revenue obtained from the price difference. D. The market must be segmentable. E. All of the above conditions must exist.

A. It should price its product higher than competing alternatives.

If a firm positions its brand to be of higher quality than competitive offerings, how should it price its product? A. It should price its product higher than competing alternatives. B. It should use a flexible pricing strategy. C. It should price its product based on a market share objective. D. It should price its product based on a profit objective. E. It should use a penetration pricing strategy.

flexible pricing strategy

If a product is perishable, this may require a ____ ____ ____. The key in these situations is to come up with effective methods of varying prices according to demand.

price skimming

In _____ _____, a firm charge the highest price possible that buyers who must desire the product will pay. This is consistent with financial pricing objectives such as profit and it requires a degree of price insensitivity on the part of the target market. We see this situation often with new products that represent significant improvements and when competition is minimized by technology or patent barriers.

psychological pricing

In using _____ _____, sellers consider the psychology of prices and not simply the economics.

D. Only statement IV is true.

Profit pricing objectives cannot I. be expressed in dollar amount. II. be expressed as a percent increase in profit from a previous period. III. be used to maximize profits. IV. be used to maximize market share. A. Only statement I is true. B. Only statement II is true. C. Only statement III is true. D. Only statement IV is true. E. Statements I, II, III, and IV are all true.

positioning

The important thing to remember is that price perceptions are linked to _______ perceptions. If a firm wishes to position its product at the highest-quality position, the price should be relatively higher than that of the competition.

deal prone

Used too frequently and copied by competitors, price promotions can create "____-____" customers who wait until brands go on sale before buying them.

B. price escalation

What is a potential pricing problem for an exporter entering a foreign market? A. countertrade B. price escalation C. competitive parity D. system pricing E. all of the above

C. price skimming

What pricing strategy is consistent with inelastic demand? A. odd pricing B. flexible pricing C. price skimming D. penetration pricing E. none of the above

E. all of the above

What type of company might benefit from using a flexible pricing strategy for its product or service? A. a hotel B. a major league hockey team C. an airline D. a Valentine's Day candy producer E. all of the above

C. cash discount

What type of discount rewards customers for paying their bills promptly? A. cumulative quantity discount B. noncumulative quantity discount C. cash discount D. functional discount E. allowances

cumulative quantity discount

When a discount is given over a number of purchases/over time, it is called a _____ ______ _____. For instance, a customer is given a free haircut after the 10th haircut (marked off on a card).

penetration pricing strategy

When demand is elastic and there is a high degree of price sensitivity, a _______ _____ ______ may be used, particularly when there is a market share objective.

A. Microsoft giving away Internet Explorer for free to edge out Netscape, the market leader

Which is an example of pricing based on a market share objective? A. Microsoft giving away Internet Explorer for free to edge out Netscape, the market leader B. an airline cutting prices to increase cash flow C. McDonald's discounting kids' meals in order to get more business and maximize profits D. Intel using a market-skimming strategy with its new Pentium products E. Rolex pricing its product above the competition to position itself as "the best"

D. countertrade

Which of the following is not a potential problem for global marketers? A. price escalation B. fluctuations in currency exchange rates C. governmental price controls D. countertrade E. prices having to be higher in foreign markets due to tariffs, or duties

marginal cost coverage

____ ___ ____ is often preferred when penetrating new markets or reducing excess inventory. When those products are treated as stand-alone profit centers, full cost accountability is usually allocated.

system prices

____ ____ are those set on the sale of turnkey operations or a total systems package that includes some assortment of bundled products and services.

transfer

____ prices set determining the cost of products shipped between headquarters and foreign subsidiaries. these prices are important in the determination of correct duties and related fees and can have a significant impact on the financial performance of the subsidiary. They have been set low in the past to avoid taxation of profits in the home country, and they have been set high to avoid the problem of repatriating profits from countries with unconvertible or low value currencies.

financial pricing objectives

_____ ____ ____ involve profit or some other desirable financial target. include satisfactory profit levels that are specified (e.g. a target return) or profit maximization objectives. they are expressed in dollar amount or percent change from the previous period. ex: cash flow objective--to recover cash as fast as possible

price escalation

_____ ____ is a problem that primarily plagues the export marketer. Prices in foreign markets are generally higher than those at home because of the increased costs arising form tariffs, duties, exchange rate fluctuations, transportation, custom costs, etc.

competitive parity

_____ ______ is an approach used when comparing prices of other foreign product alternatives in the marketplace.

hedging

a method of protecting one or more of the parties against uncontrollable changes. it may involve forward purchasing of currencies, exchange of currencies, or other methods to insure the same "value" of exchange when the transaction is complete.

countertrade

a more common method of exchange in emerging markets than in growth or mature markets. It refers to receiving payment for goods sold in some form other than cash.

price penetration

also called market penetration pricing; a strategy of pricing lower than the competition, used often when there is a market share objective. It is often used when the demand is elastic and there is a lot of price sensitivity.

price skimming

also called market skimming pricing--The firm charges the highest price possible that buyers will pay. This is consistent with financial pricing objectives, such as profit, and it requires a degree of price insensitivity on the part of the target market. This situation is often seen with new products that represent significant improvements and where competition is minimized by technology or patent barriers. When demand is inelastic (price changes don't significantly affect quantity demands), this strategy is often used.

location pricing

different type of segmented or discriminatory pricing; a company charges different prices for different locations, even though the cost of offering each location is the same

time pricing

different type of segmented or discriminatory pricing; a firm varies its prices by the season, the month, the day, and even the hour

customer-segment pricing

different type of segmented or discriminatory pricing; different customers pay different prices for the same product or service

product form pricing

different type of segmented or discriminatory pricing; different versions of the product are priced differently but not according to differences in their costs

promotional allowances

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

cash discount

price adjustment made to reward customers for an early payment of bills. ex: 2/10, net 30, which means that although payment is due within 30 days, the buyer can deduct 2 percent if the bill is paid within 10 days.

seasonal discount

price adjustment made to reward customers for off season buying

quantity discount

price adjustment made to reward customers for volume purchases. Such discounts provide an incentive to the customer to buy more from one given seller, rather than from many different sources.

inelastic demand

price changes don't significantly affect quantity demanded

trade-in allowances

price reductions given for turning in an old item when buying a new one

exchange rate fluctuations

prices quoted well in advance based on exchange rates at the time may result in a windfall profit or a large loss if exchange rates between the relevant currencies are significantly different at the time payment becomes due.

geographical pricing

pricing its products for different customers in the world

penetration pricing strategy

pricing lower than the competition; we see this most often when there are competing technology standards involved. Here a firm may introduce a new product using this strategy to initially gain market share and weaken the competition. the lower price also helps set up a barrier to entry for potential customers.

price elasticity

responsiveness of quantity demand to price changes

segmented pricing

the company sells a product or service at two or more prices, even though the difference in prices is not based on differences in costs. For this to be an effective strategy, certain conditions must exist. The market must be segmentable, and the segments must show different degrees of demand. The costs of segmenting and watching the market cannot exceed the extra revenue obtained from the price difference. This also must be legal (not intended to destroy/limit competition)

commoditization

the perception of little distinct differences between alternatives

price

the value placed on what is exchanged. something of value is exchanged for satisfaction and utility. the exchange includes tangible (functional) and intangible (prestige) factors

FOB-origin pricing

type of geographical pricing; ____-____ _____ is a practice that means the goods are placed free on board a carrier. At that point the title and responsibility pass to the customer, who pays the freight from the factory to the destination.

zone pricing

type of geographical pricing; falls between FOB-origin pricing and uniform-delivered pricing. The company sets up two or more zones. All customers within a given zone pay a single total price; the more distance the zone, the higher the price

Uniform-delivered pricing

type of geographical pricing; the opposite of FOB pricing; the company charges the same price plus freight to all customers, regardless of their location. The freight charge is set at the average freight cost.

freight-absorption pricing

type of geographical pricing; the seller who is anxious to do business with a certain customer or geographical area might use this. the seller absorbs all or part of the actual freight charges in order to get the desired business.

basing-point pricing

type of geographical pricing; using this, the seller selects a given city as a "basing point" and charges all the customers the freight cost from that city to the customer location, regardless of the city from which the goods are actually shipped. some companies set up multiple basing points to create more flexibility; they quote freight charges from the basing point city nearest to the customer.

discount and allowance pricing

type of price adjustment strategy; most companies adjust their basic price to reward customers for certain responses, such as early payment of bills, volume purchases, and off-season buying.

rebates

type of promotional pricing; Manufacturers sometimes offer cash _____ to consumer who buy the product from dealers within a specified time; the manufacturer sends the _____ directly to the customer.

special-event pricing

type of promotional pricing; Sellers will also use ____ ____ ____ in certain seasons to draw more customers (e.g. Back to school Days Sale)

loss leaders

type of promotional pricing; when stores price a few products as ___ _____ to attract customers to the store in the hope that they will buy other items at normal markups.

reference prices

type of psychological pricing; prices that buyers carry in their minds and refer to when looking at a given product. might be formed by noting current prices, remembering past pries, or assessing the buying situation.

price skimming strategy

when demand is inelastic, a ____ _____ _____ is used to determine price.

price controls

when foreign governments set these, they usually prohibit setting prices above a predetermined level without approval by the government.

competition

while long-term profit may always be a goal of businesses, short-term pricing objectives may center on the _____.