Term
| The Importance of Price To the Seller |
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Definition
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Term
| The Importance of Price To the Consumer |
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Definition
| Price is the Cost of Something |
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Term
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Definition
| Price allocates resources
in a free-market economy |
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Term
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Definition
The Sacrifice Effect of Price
Price is that which is sacrificed to get a good or service.
The Information Effect of Price
People infer quality information based on price.
Value Is Based upon Perceived Satisfaction
“Reasonable price” means “perceived reasonable value.” |
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Term
| The Importance of Price to Marketing Managers: Revenue |
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Definition
| The price charged to
customers multiplied by the number of units sold. |
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Term
| The Importance of Price to Marketing Managers: Profit |
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Definition
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Term
| Profit-Oriented Pricing Objectives |
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Definition
| Profit Maximization, Satisfactory Profits, Target Return on Investment |
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Term
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Definition
| Setting prices so that total revenue is as large as possible relative to total costs. |
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Term
| Return on Investment
(ROI) |
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Definition
Net profit after taxes divided by total assets.
ROI = Net profit after taxes
Total assets |
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Term
| Sales-Oriented Pricing Objectives |
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Definition
| Market Share, Sales Maximization |
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Term
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Definition
| A company’s product sales as a percentage of total sales for that industry. |
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Term
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Definition
Rather than strive for market share, sometimes companies try to maximize sales.
Uses a short-term objective to maximize sales
Ignores profits, competition, and the marketing environment
May be used to sell off excess inventory |
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Term
| Status Quo Pricing Objectives |
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Definition
| Maintain Existing Prices, Meet Competitions Price |
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Term
| The Demand
Determinant of Price: Demand |
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Definition
| The quantity of a product that
will be sold in the market at various prices for a specified period. |
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Term
| The Demand
Determinant of Price: Supply |
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Definition
| The quantity of a product that will be offered to the market by a supplier at various prices for a specific period. |
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Term
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Definition
| The price at which demand and supply are equal. |
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Term
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Definition
| Consumers’ responsiveness or sensitivity to changes in price. |
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Term
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Definition
| Consumers buy more or less
of a product when the
price changes. |
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Term
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Definition
| An increase or a decrease in
price will not significantly
affect demand. |
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Term
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Definition
| An increase in sales exactly offsets a decrease in prices,
so total revenue remains the same. |
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Term
| Elasticity of Demand Equation |
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Definition
Elasticity = Percentage change in quantity demanded of good A / Percentage change in price of good A
If E > 1, demand is elastic.
If E < 1, demand is inelastic.
If E = 1, demand is unitary. |
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Term
| Elasticity of Demand Chart |
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Definition
Price Goes… Revenue Goes… Demand is…
Down Up Elastic
Down Down Inelastic
Up Up Inelastic
Up Down Elastic
Up or Down Stays the Same Unitary Elasticity |
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Term
| Factors that Affect
Elasticity of Demand |
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Definition
| Availability of Substitutes, Price Relative to Purchasing Power, Product Durability, A Product's Other Uses, Rate of Inflation |
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Term
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Definition
| Discounting early purchases, Limiting early sales at discounted prices, Overbooking capacity |
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Term
| Yield Management Systems Cont... |
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Definition
Yield Management Systems (YMS) make it possible for a company to:
1) Stimulate demand when demand is low
2) Maximize profits when demand is high |
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Term
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Definition
| Varies with changes in level of output |
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Term
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Definition
| Does not change as level of output changes |
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Term
| Average Variable Cost (AVC): |
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Definition
| Total variable cost divided by quantity of output |
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Term
| Average Total Cost (ATC): |
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Definition
| Total costs divided by quantity of output |
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Term
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Definition
| The change in total costs associated with a one-unit change in output |
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Term
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Definition
The cost of buying the product
from the producer plus amounts
for profit and for expenses not
otherwise accounted for |
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Term
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Definition
| The practice of marking up prices by 100 percent, or doubling the cost |
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Term
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Definition
| A method of setting prices that occurs when marginal revenue equals marginal cost. |
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Term
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Definition
| The extra revenue associated
with selling an extra unit of output, or the change in total revenue with a one-unit change in output |
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Term
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Definition
Break Even Quantity = Total Fixed Costs / Fixed Cost Contribution
Fixed Cost Contribution = Price - Avg, Variable Cost |
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Term
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Definition
High prices may induce firms to enter the market.
Competition can lead to price wars. |
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Term
| Distribution Strategy: Manufactures |
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Definition
Offer a larger profit margin or trade allowance
Use exclusive distribution
Franchising
Avoid business with price-cutting discounters
Develop brand loyalty |
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Term
| Distribution Strategy: Wholesalers/Retailers |
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Definition
Sell against the brand
Buy gray-market goods |
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Term
| The Impact of the Internet |
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Definition
Shopping Bots: A program that searches the Web for the best price for a particular item
Internet Auctions: Business-to-business auctions are likely to be the dominant form of online auctions in the future |
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Term
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Definition
| Price is often used as a promotional tool to increase consumer interest |
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Term
| Demands of Large Customers |
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Definition
Require suppliers to pay cash rebates if stores’ profit margins aren’t met.
Fines for violations of ticketing, packing, and shipping rules. |
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Term
| The Relationship of
Price to Quality |
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Definition
| When a purchase decision involves uncertainty, consumers tend to rely on a high price as a predictor of good quality. |
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Term
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Definition
| Charging a high price to help promote a high-quality image. |
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Term
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Definition
1) Ease of use
2) Versatility
3) Durability
4) Serviceability
5) Performance
6) Prestige |
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