MKTG 101 Ch. 11-GENERAL PRICING APPROACHES

Cost-Oriented

With ____-________ pricing approaches, a price setter stresses the cost side of the pricing problem, not the demand side. Price is set by looking at the production and marketing costs and then adding enough to cover direct expenses, overhead, and profit.

Odd-even pricing

___-____ _______, involves setting prices a few dollars or cents under an even number. D.O.P.

Cost-plus pricing

____-____ _______ involves summing the total unit cost of providing a product or service and adding a specific amount to the cost to arrive at a price. C.O.

Bundle pricing

______ _______ is the marketing of two or more products in a single package price. D.O.P.

Target pricing

______ _______, results in the manufacturer deliberately adjusting the composition and features of a product to achieve the target price to consumers. D.O.P.

Skimming pricing

A firm introducing a new or innovative product can use ________ _______, setting the highest initial price that customers really desiring the product are willing to pay. D.O.P.

Profit-Oriented

A price setter may choose to balance both revenues and costs to set price using ______-________ approaches.

Target return-on-investment pricing

Firms such as General Motors and many public utilities use ______ ______-__-__________ _______ to set prices to achieve a return-on-investment (ROI) target such as a percentage that is mandated by its board of directors or regulators. For example, an electric utility may decide to seek a 10 percent ROI. If its investment in plant and equipment is $50 billion, it would need to set the price of electricity to its customers at a level that results in $5 billion a year in profit. P.O.

Target return-on-sales pricing

Firms such as supermarkets often use ______ ______-__-_____ _______ to set prices that will give them a profit that is a specified percentage—say, 1 percent—of the sales volume. This price method is often used because of the difficulty in establishing a benchmark of sales or investment to show how much of a firm's effort is needed to achieve the target. P.O.

Loss-leader pricing

For a special promotion retail stores deliberately sell a product below its customary price to attract attention to it. The purpose of this ____-______ _______, is not to increase sales but to attract customers in hopes they will buy other products as well, particularly the discretionary items with large markups. For example, Best Buy, Target, and Walmart sell CDs at about half of music companies' suggested retail price to attract customers to their stores. C.O.

Customary pricing

For some products where tradition, a standardized channel of distribution, or other competitive factors dictate the price, _________ _______ is used. Candy bars offered through standard vending machines have a customary price of 75 cents, and a significant departure from this price may result in a loss of sales for the manufacturer. C.O.

Penetration pricing

Setting a low initial price on a new product to appeal immediately to the mass market is ___________ _______, the exact opposite of skimming pricing. D.O.P.

Above-, at-, or below-market pricing

The "market price" of a product is what customers are generally willing to pay, not necessarily the price that the firm sets. For most products it is difficult to identify a specific market price for a product or product class. Still, marketing managers often have a subjective feel for the competitors' price or the market price. Using this benchmark, they then may deliberately choose a strategy of _____-__ __-_____-______ _______. C.O.

1. Standard Markup 2. Cost-Plus

The 2 Cost-Oriented pricing approaches are:

1. Customary 2. Above, At, or Below Market 3. Loss Leader

The 3 Competition-Oriented pricing approaches are:

1. Target Profit 2. Target Return-on-Sales 3. Target Return-on-Investment

The 3 Profit-Oriented pricing approaches are:

1. Skimming 2. Penetration 3. Prestige 4. Odd-Even 5. Target 6. Bundle 7. Yield Management

The 7 Demand-Oriented pricing approaches are:

Target profit pricing

When a firm sets an annual target of a specific dollar volume of profit, this is called ______ ______ _______. P.O.

Demand-Oriented

______-________ pricing approaches weigh factors underlying expected customer tastes and preferences more heavily than such factors as cost, profit, and competition when selecting a price level.

Standard markup pricing

________ ______ _______, entails adding a fixed percentage to the cost of all items in a specific product class. C.O.

Prestige pricing

________ _______ involves setting a high price so that quality- or status-conscious consumers will be attracted to the product and buy it. D.O.P.

Yield management pricing

is the charging of different prices to maximize revenue for a set amount of capacity at any given time. D.O.P.