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Marketing 12
Chapter 12
12
Marketing
Undergraduate 3
11/28/2011

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Term
Name the (5) basic components of pricing strategies (the Five C's of Pricing)
Definition
1. Company Objectives
2. Customers
3. Costs
4. Competition
5. Channel Members
Term
Name (4) common company objectives
Definition
1. Profit orientation: focuses on target profit pricing, maximizing profits, and target return pricing
2. Sales orientation: increasing sales will help the firm more than increasing profits
3. Competitor orientation: strategize according to the premise that they should measure themselves primarily against their competition
4. Customer orientation: invokes the concept of value
Term
How do you measure price elasticity?
Definition
Price elasticity of demand =
% change in quantity demanded/% change in price

Elastic: when price elasticity is less than -1
Inelastic: when price elasticity is greater than -1
Term
Name the break even formula
Definition
Break-even point (units) = fixed costs/contribution per unit
Term
Name/describe the 3 types of competition
Definition
1. Oligopolistic competition: occurs when only a few firms dominate the market
2. Monopolistic competition: occurs when there are many firms that sell closely related but not homogenous products
3. Pure competition: occurs when different companies sell commodity products that consumers perceive as substitutable
Term
Name (2) other influences on pricing
Definition
1. The internet
2. Economic factors
Term
Name (3) pricing strategies
Definition
1. Cost-based method
2. Competitor-based method
3. Value-based methods
- improvement value method
- cost of ownership method
Term
Name (2) pricing strategies when pricing new products
Definition
1. Price skimming: selling at a price that innovators and early adopters are willing to pay
2. Market penetration pricing: setting the initial price low for the introduction of the new product - objective being to build sales and profits quickly
Term
Name (4) psychological factors affecting value-based pricing strategies
Definition
1. Consumers' use of reference prices
2. Everyday low pricing vs. High/low pricing
3. Odd prices
4. Price-quality relationship
Term
Name (5) pricing tactics for business to business
Definition
1. Seasonal discounts
2. Cash discounts
3. Allowances (advertising allowance: price reduction for featuring a product in a channel member's advertising efforts) (listing allowances: fees paid to retailers simply to get new products into stores
4. Quantity discounts (cumulative vs. non-cumulative)
5. Uniform delivered vs. geographic pricing
Term
Name (4) pricing tactics aimed at consumers
Definition
1. Price lining
2. Price bundling
3. Leader pricing: aggressively pricing and advertising a regularly purchased item
4. Consumer price reduction
- Markdowns
- Quantity discounts for consumers
- Seasonal discounts
- Coupons and rebates
Term
Name (4) legal aspects and ethics of pricing
Definition
1. Deceptive and illegal price advertising
- Deceptive reference prices
- Loss leader pricing (lowering price below store's cost)
- Bait and switch
2. Predatory pricing: a firm sets very low prices with the intent to drive its competition out of business
3. Price discrimination: selling the same product to different resellers for different prices
4. Price fixing ( horizontal vs. vertical price fixing)
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