Term
| What are the Stages for establishing Prices? |
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Definition
| -Development of pricing objectives -Assessment of target markets evaluation of price -Evaluation of competitors’ prices -Selection of a basis for pricing -Selection of a pricing strategy -Determination of a specific price |
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Term
| What are the different types of Pricing Objectives? What do they involve? |
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Definition
-Survival – pricing that is done souly to survive during short times of non profitability
-Profit – identify price and cost levels that allow the firm to maximize profit
-Return on Investment
-Market Share –
-Cash Flow – some companies set prices so they can recover cash as quickly as possible
-Status Quo – identify price levels that help stabilize demand and sales
-Product quality – set prices to recover research and development expenditures and establish a high-quality image |
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Term
| What is Cost Bases Pricing? |
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Definition
| – a dollar amount or percentage is added to the cost of the product. |
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Term
| What are the two forms of cost based pricing? |
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Definition
-Cost-plus pricing
-markup pricing |
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Term
| What is Cost-plus pricing? When is it popular and why? |
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Definition
– the seller’s costs are determined (usually during a project or after a project is completed), and then a specified dollar amount or percentage of the cost is added to the seller’s cost to establish the price
• Popular in inflationary times because the input raw materials may fluctuate in price often |
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Term
| What is Markup pricing? What can it be a percentage of? How are the percentages calculated? |
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Definition
– commonly used by retailers, a product’s price is derived by adding a predetermined percentage of the cost, called markup, to the cost of the product
• Markup can be a percentage of the cost or selling price
• Markup as a % of cost = markup/cost
• Markup as a % of price = markup/selling price |
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Term
| What is an advantage to a single price? |
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Definition
| simplicity, easily understood by employees and customers. It also reduces the chance of an adversarial relationship between customers and salespeople |
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Term
| What are the disadvantages to a single price? |
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Definition
| if the single price is too high, some potential customers may be unable to afford the product. If the price is too low the company loses money |
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Term
| What is Secondary-Market Pricing? |
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Definition
| – setting one price for the primary target market and a different price for another market |
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Term
| What is Periodic Discounting? |
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Definition
| – the temporary reduction of prices on a patterned or systematic basis |
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Term
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Definition
| – charging the highest possible price that buyers who most desire the product will pay |
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Term
| What is Penetration Pricing? |
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Definition
| – setting prices below those of competing brands to penetrate a market and gain a market share quickly |
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Term
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Definition
| o Captive Pricing – pricing the basic product in a product line low, while pricing related items higher |
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Term
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Definition
| – is often used when a product line contains several versions of the same product (highest quality products are given highest price, etc.) |
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Term
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Definition
| – pricing an item in a product line low with the intention of selling a higher-priced item in the line |
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Term
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Definition
| – setting a limited number of prices for selected groups or lines of merchandise |
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Term
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Definition
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Term
| What is Professional Pricing? |
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Definition
| – fees set by people with great skill or experience in a particular field |
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Term
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Definition
| – have their products priced near or even below cost |
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