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MGMT232
chapter 9
28
Management
Undergraduate 3
11/01/2010

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Term
price
Definition
the amount of money charged for a product or service, or the sum of the values that customers exchange for the benefits of having or using the product or service
Term
customer value-based pricing
Definition
setting price based on buyers' perceptions of value rather than on the seller's cost
Term
good-value pricing
Definition
offering just the right combination of quality and good service at a fair price
Term
value-added pricing
Definition
attaching value-added features and services to differentiate a company's offers and charging higher prices
Term
cost-based pricing
Definition
setting prices based on the costs for producing, distributing, and selling the product plus a fair rate of return for effort and risk
Term
fixed costs (overhead)
Definition
costs that do not vary with production or sales level
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
cost-plus pricing (markup pricing)
Definition
adding a standard markup to the cost of the product
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
competition-based pricing
Definition
setting prices based on competitors' strategies, prices, costs, and market offerings
Term
target costing
Definition
pricing that starts with an ideal selling price, then targets costs that will ensure that the price is met
Term
demand curve
Definition
a curve that shows the number of units the market will buy in a given time period, at different prices that might be charged
Term
price elasticity
Definition
a measure of the sensitivity of demand to changes in price
Term
market-skimming pricing
Definition
setting a high price for a new product to skim maximum revenues layer by layer from the segments willing to pay the hight price; the company makes fewer but more profitable sales
Term
market-penetration pricing
Definition
setting a low price for a new product in order to attract a large number of buyers and a large market share
Term
product line pricing
Definition
setting the price steps between various products in a product line based on cost differences between the products , customer evaluations of different features, and competitors' prices
Term
optional-product pricing
Definition
the pricing of optional or accessory products along with a main product
Term
captive-product pricing
Definition
setting a price for products that must be used along with a main product, such as blades for a razor and games for a videogame console
Term
by-product pricing
Definition
setting a price for by-products in order to make the main product's price more competitive
Term
product bundle pricing
Definition
combining several products and offering the bundle at a reduced price
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
Term
psychological pricing
Definition
pricing that considers the psychology of prices and not simply the economics; the price is used to say something about the product
Term
reference prices
Definition
prices that buyers carry in their minds and refer to when they look at a given product
Term
promotional pricing
Definition
temporarily pricing products below the list price, and sometimes even below cost, to increase short-run sales
Term
dynamic pricing
Definition
adjusting prices continually to meet the characteristics and needs of individual customers and situations
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