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Chapter 10
In modifying the market, the company tries to increase the consumption of the current product. It may look for new users and new market segments. The manager may also look for ways to increase usage a
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Marketing
Undergraduate 1
05/23/2011

Additional Marketing Flashcards

 


 

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Term
Price
Definition
The amount of money charged for a product or service, the sum of the values that customers exchange for the benefits of having or using the product or service.

Pricing: No matter what the state of the economy, companies should sell value, not price.
Term
Pricing strategies
Definition
Setting the right price is one of the marketer's most difficult tasks. A host of factors come into play. But finding and implementing the right price strategy is critical to success.
Term
Ceiling Price
Definition
Customer perceptions of the product's value set the celing for prices. If customers perceive that the product's price is greater than its value they will not buy the product.
Term
Floor Price
Definition
determined by product cost.
Term
3 Major pricing strategies
Definition
Customer value-based pricing
cost based pricing
competition based pricing
Term
Customer value Based Pricing
Definition
(Like everything else in marketing good pricing starts with customers and their perceptions of value)

setting price based on buyers perceptions of value rather than on the seller's cost

Means the marketer cannot design a product and marketing program and then set the price. Price is considered along with all other marketing mix variables before the marketing program is set.
Term
The right pricing strategy
Definition
Delivers both value to the custumer and profits to the company
Term
Good Value Pricing
Definition
Offering the right combination of quality and good service at a fair price. (treseme ad, salon look and feel at a fraction of the price)
Term
Value added pricing
Definition
Attaching value-added features and services to differentiate a company's offers and charing higher prices.

IE. Umbrella manufacturer: instead of making cheaper umbrellas, offer new colors, and features for the same price.
Term
EDLP: Everyday Low Pricing
Definition
Part of good-value pricing, involves charing a constant everyday low price with few or no temporary price discounts.

Ie. Costco, Walmart
Term
High-low pricing
Definition
Part of good value pricing: strategy where charing higher prices on an everyday basis but running frequent promotions to lower prices temporarily on selected items. (department stores)
Term
Cost Based Pricing
Definition
Setting prices based on the costs for producing distributing and selling the product plus a fiar rate of return for effort and risk
Term
Fixed Costs
Definition
Costs that do not vary with production or sales level

ie. building rent.
Term
Variable Costs
Definition
Costs that vary directly with the level of production
Term
Total Costs
Definition
The sum of the fixed and variable costs for any given level of production
Term
Experience learning curve
Definition
The drop in the average per-unit production cost that comes with accumulated production experience

If a downward sloping experience curve exists, this is highly significant for the company. The company's unit production cost fall, but it will fall faster if the company makes and sells more during a given time period. But the market has to stand ready to buy the higher output. Must have large market share early on.
Term
Cost-plus pricing (markup pricing)
Definition
Adding a standard markup to the cost of the product
Term
Unit cost: equation
Definition
= Variable cost + ((fixed cost)/(unit sales))
Term
Markup price: Equation

ie. 20% markup
Definition
= Unite cost/ (1-desired return on sales)
ie. 20% markup

=unit cost/(1-.2)
Term
Make sense? Using standard markup to set prices?

And

Why is it popular
Definition
Usually no, any pricing method that ignores demand and competitor prices is not likely to lead to the best price.

Why it's still popular:
sellers are more certain about cost than demand
when all competitors use this model, results for costs and pricing is similar therefore price wars are avoided.
People believe it is fair
Term
Break-even pricing (target return pricing)
Definition
Setting price to break even on the costs of making and marketing a product or setting price to make a target return.
Term
Break even volume: Equation
Definition
= fixed cost/ (price- variable cost)
Term
Competition Based Pricing
Definition
Setting prices based on competitors strategies, prices, costs and market offerings

Doesn't necessarily mean price
Beat competition other ways:
better atmosphere
better customer service
think booksmith vs. borders
Term
target costing
Definition
Pricing that starts with an ideal selling price and then targets costs that will ensure that the price is met.
Term
Price Adjustment Strategies (7)
Definition
1. Discount and allowance pricing
2. Segmented pricing
3. psychologial pricing
4. promotional pricing
5. geographical pricing
6. dynamic pricing
7. international pricing

Companies adjust their basic prices to account for various customer differences and changing situations
Term
Discount
Definition
A straight reduction in price on purchases during a stated period of time or of larger quantities
Term
Allowance
Definition
Promotional money paid by manufacturers to retailers in return for an agreement to feature the manufacturer's products in some way
Term
Segmented Pricing
Definition
Selling a product or service at two or more prices, where the difference in prices is not based on differences in costs.

Museums and movie theaters may charge lower prices for seniors or students
Term
product form pricing
Definition
different versions of the product are priced pdifferntly but not according to difference in their costs.

water costs a certain price at the supermarket, but at a concert its a tottaly different price.
Term
location based pricing
Definition
company charges different prices for different locations even though the cost of offering each location is the same. For instance statue universities charge higher tuition for out of state students and theatersvary their seat prices beacuse of audience preferences for certain locations.
Term
location based pricing
Definition
company charges different prices for different locations even though the cost of offering each location is the same. For instance statue universities charge higher tuition for out of state students and theatersvary their seat prices beacuse of audience preferences for certain locations.
Term
Time based Pricing
Definition
Frim varies its price by the season, the month, the day and even the hours. Movie theaters charge matinee pricing during the daytime.
Term
Psychological Pricing
Definition
Pricing that considers the psychology of prices not simply the ecnomics the price says something about the product.

perfume
Term
Reference Prices
Definition
Prices that buyers carry in their minds and refer to when they look at a given product
ie. Ralph Lauren selling its Ricky bag for 14,000 during the recession, making its Tiffin bag a steal at just 2,595
Term
Promotional Pricing
Definition
Temporarily pricing products below the list price and sometimes even below costs, to increase short run sales.

creates excitement and urgency
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