Term
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Definition
| A firm charges a high introductory price, often coupled with heavy promotion |
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Term
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Definition
| A firm charges a relatively low price for a product initially as a way to reach the mass market |
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Term
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Definition
| Charging a price identical to or very close to the competition’s price |
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Term
| Situations When Price Skimming Is Successful |
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Definition
| Inelastic Demand, Unique Advantages/Superior, Legal Protection of Product, Technological Breakthrough, Blocked |
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Term
| Penetration Pricing: Advantages vs Disadvantages |
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Definition
Advantages:
Can lead to lower cost per unit as production expands
Discourages or blocks competition from market entry
Boosts sales and provides large profit increases
Disadvantages:
Requires gear up for mass production
Selling large volumes at low prices
Strategy to gain market share may fail |
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Term
| Status Quo Pricing: Advantages vs Disadvantages |
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Definition
Advantages:
Simplicity
Safest route to long-term survival for small firms
Disadvantages:
Strategy may ignore demand and/or cost |
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Term
| Unfair Trade
Practices Acts |
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Definition
| Laws that prohibit wholesalers
and retailers from selling
below cost |
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Term
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Definition
| An agreement between two
or more firms on the price they
will charge for a product |
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Term
| Price Discrimination: The Robinson-Patman Act of 1936 |
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Definition
There must be price discrimination.
Transaction must occur in interstate commerce.
Seller must discriminate by price among two or more purchasers.
Products sold must be commodities or tangible goods.
Products sold must be of like grade and quality.
There must be significant competitive injury. |
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Term
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Definition
| The Practice of Charging a Very Low Price for a Product With the Intent of Driving Competitors out of business or out of a Market |
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Term
| Tactics for Fine-Tuning
the Base Price |
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Definition
| Discounts, Geographic Pricing, Other Pricing Tactics |
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Term
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Definition
Sometimes managers price their products too low, thereby reducing company profits. This seems to happen for two reasons:
1) Managers attempt to buy market share through aggressive pricing.
2) Managers have a natural tendency to want to make decisions that can be justified objectively. |
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Term
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Definition
| The buyer absorbs the freight
costs from the shipping point
(“free on board”) |
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Term
| Uniform Delivered Pricing |
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Definition
| The seller pays the freight charges
and bills the purchaser an
identical, flat freight charge |
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Term
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Definition
| The U.S. is divided into zones, and
a flat freight rate is charged to customers in a given zone |
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Term
| Freight Absorption Pricing |
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Definition
| The seller pays for all or part of
the freight charges and does not
pass them on to the buyer |
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Term
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Definition
| The seller charges freight from a basing point, regardless of the city from which the goods are shipped |
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Term
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Definition
| Setting Prices for an Entire Line of Product |
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Term
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Definition
| Cost That Are Shared in the Manufacturing and Marketing of Several Products in a Product Line |
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Term
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Definition
Demand-Oriented Tactics
Cost-Oriented Tactics |
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Term
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Definition
Delayed-quotation pricing: Used for industrial installations and many accessory items; firm price is not set until the item is finished or delivered.
Escalator pricing: Final selling price reflects cost increases incurred between the order time and the delivery time.
Hold prices constant, but add new fees. |
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Term
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Definition
| The Use of Discounts by Salespeople to Increase Demand for One or More Products in a Line |
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Term
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Definition
Value-Based Pricing
Bundling or Unbundling |
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