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Chapter 11
Marketing Final
66
Marketing
Undergraduate 2
06/08/2009

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Term
Price
Definition
the value the customer give up or exchange to obtain a product
-the only p that represents revenue
-effects all other areas of the marketing mix
Term
Forms of payment
Definition
cash and credit-most common,
goods and services,
a favor,
anything the other party values
Term
Opportunity Costs
Definition
the value of something that is given up to obtain something else
Term
Steps in Price Planning
Definition
Develop Pricing Objectives, Estimate Demand, Determine Costs, Evaluate the Pricing Environment,choose a pricing strategy, Develop Pricing tactics
Term
Types of Pricing Objectives
Definition
Sales or market share objectives, Profit objectives, Competitive effect objectives, Customer satisfaction objectives, image enhancement objectives
Term
Sales or marketing share objectives
Definition
maximize sales or increase market share
Term
Profit Objectives
Definition
set desire profit margin
Term
Competitive effect objectives
Definition
reduce the effectiveness of our competition markets
Term
Customer Satisfactions
Definition
building long term customer relationships
Term
Image enhancement objectives
Definition
focused on promoting product quality and image
Term
Ways to change price
Definition
increase/decrease sticker price
increase/decrease quality
increase/decrease quantity
change the terms of the sale
Term
Value
Definition
People may be willing to pay a premium because they believe it makes a statement about their own worth.
Term
Estimating Demand
Identify demand for an entire product category
Predicts the company market share
Definition
-refers to customers desire for products,
-How big is the pie,
-How much of the product do consumer want,
-How big of a slice can we get,
-How will this change as the price goes up or down
Term
The Price Elasticity of Demand
Definition
A measure of the sensitivity of customers to changes in price

%change of quality demanded/%change of price
Term
Types of Costs
Definition
Variable costs,Fixed costs, Average fixed costs, Total costs
Term
Variable Costs
Definition
varies as production varies with unit produce
Term
Fixed Costs
Definition
remains constants don't change with unit produced.
Term
Average fixed costs
Definition
fixed costs/#of units
Term
Total costs
Definition
Variable Costs + Fixed Costs
Term
Break-even analysis
Definition
Examines the relationship between cost and price and determines what sales volume must be reached
Term
Marginal Analyisis
Definition
-Provides a way for marketers to look at cost and demand at the same time
-Examines the relationship of marginal cost to marginal revenue
Profit is maximized when marginal revnue =marginal costs
Term
Marginal Costs
Definition
cost associated with producing one additional unit
Term
Marginal Revenue
Definition
Change in revenue from selling one additional unit
Term
Evaluating the Pricing Environment
Definition
The economy, the competition, Consumer trends, and international environmental influences.
Term
The economy
Definition
trimming the fat-during the recession when companies lower prices

Increasing Prices- during inflation the price increase
Term
The competition
Definition
stay away from price wars
Term
Consumer trends
Definition
demographics and cultural shifts
Term
Cost plus-pricing
Definition
cost in adding a particular markup

-marketers figures all costs for the product and then adds desired profit per unit.

-Straight markup pricing-price is calculated by adding a predetermined % to the costs.
Term
Pricing Strategies Based on Costs:Advantages
Definition
-Simple to calculate
-relatively risk free
Term
Pricing Strategies Based on Cost:Disadvantages
Definition
Fails to consider: target market, demand, competition, product life cycle, products image

Difficult to accurately estimate.
Term
Steps in Costs-Plus Pricing
Definition
Estimate unit costs

Calculate mark-up
-markup on cost
-markup on selling price
gross margin
Term
Pricing Strategies based on Demand
Definition
selling price is based on an estimate of volume or quantity that a firm can sell in different marketers at different prices

-Target costing
-Yield management pricing
Term
Target Costing
Definition
identifying the quality that our customers needs the price their willing to pay and then creating the product
Term
Yield Management Pricing
Definition
A company charges different prices to different customers in order to manage capacity.
Term
Pricing Strategies
Definition
-Value Pricing (EDLP)-offers a fair value to consumers

-Everyday lower pricing strategy- Ex. Walmart
Term
New Product Pricing
Definition
Skimming Price,Penetration Pricing,Trial Pricing,
Term
Skimming Price
Definition
when a company set a high intentional prices with plans to lower them in the future

*fewer but more profitable sales
Term
Penetration Pricing
Definition
Sets a low price at the beginning penetrate the market quickly and deeply, a lot of customers, large market share

*more sales but less profitable
Term
Trail Pricing
Definition
Offering a low price for a limited time period. Reduces consumer perceived risks
Term
Pricing tactics
Definition
Pricing for Individual Products
Pricing for Multiple Products
Term
Pricing for individual Products
Definition
Two part pricing
Payment Pricing
Term
Two part Pricing
Definition
two separate payments for a product
Term
Payment Pricing
Definition
breaking price into smaller amounts
Term
Pricing for multiple Products
Definition
Price bundling
Term
Pricing for multiple Products
Definition
Price bundling
Captive Pricing
Term
Price Bundling
Definition
two or more goods sold as a single package for one price
Term
Captive Pricing
Definition
Strategically price two products that only work when used together
Term
Promotional Pricing
Definition
financing (low interest), warranties, maintenance, rebates, special events, loss leader-selling products low to bring people in
Term
Other Pricing tactics
Definition
distribution-based pricing, F.O.B. pricing, International distribution pricing terms of sale, basing-point pricing, uniform delivered pricing,freight absorption pricing.
Term
Discounting for Channel members
Definition
Trade or functional discounts, Quantity discounts, Cash discounts, Seasonal discounts.
Term
Trade of functional discounts
Definition
*% discount of the list price for member of the channel.
Term
Quantity discounts
Definition
Pricing tactic of charging reduced prices of purchases of larger quantities of a product
Term
Cash Discounts
Definition
encourages quick payments of bills
Term
Seasonal discounts
Definition
offering certain price at varies times of the year
Term
Trade Discounts
Definition
Pricing structure built around list price
Term
List Price
Definition
the price that the manufacturer sets as appropriate price for the end consumer
Term
Pricing with electronic commerce
Definition
Dynamic pricing strategies
-price can be adjusted to meet changes in the marketplace.

Auctions
Term
Psychological Issues in Pricing
Definition
Internal Reference Prices-consumers have a set price or price range in their mind
-if actual price is higher that will not purchase
-if it is to low below the internal reference price they will not purchase either.

Competition as reference Price
Term
Price Quality Inferences
Definition
Occurs when consumers are unable to judge the quality of a product through examination of prior exchange.
Term
Price Lining
Definition
The practice of setting a limited number of different specific prices called price points, for items in a product line.
Term
Psychological Pricing Strategies
Definition
Price Lining
Odd-even
Term
Odd- even
Definition
marketers assume that there is a psychological response to odd prices that differs from even prices. Which why they set prices at 1.99, 23.67 and etc.
Term
Price Fixing
Definition
Occurs when two or more companies conspire to keep prices at a certain level

-Horizontal price fixing
-Vertical price fixing
Term
Horizontal Price-fixing
Definition
occurs when competitors make the same product jointly determine wheat price they each will charge.
Term
Vertical Price-Fixing
Definition
occurs when manufactures tries to force retailer to sell at a certain price (suggested retail price)
Term
Predatory Pricing
Definition
A company sets a very low price for the purpose of driving competitors out of business.
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