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Pricing
MGKT 360 - Pricing
43
Marketing
Undergraduate 4
12/11/2009

Additional Marketing Flashcards

 


 

Cards

Term
Average fixed cost
Definition
The fixed cost per unit produced. A company's fixed costs of production are spread (averaged) over the total number of units produced. This number is used in the calculations of cost of goods sold (accountants do this task).
Term
Bait-and-switch
Definition
An illegal marketing practice in which an advertising price special is used as bait (like baiting fish) to get customers into the store with the intention of switching them to a higher priced product. Its illegal to not have the advertised product (or provide rain checks for them).
Term
Basing-point pricing
Definition
A pricing tactic in which customers pay shipping charges from set basing-point geographical locations, whether the goods are actually shipped from these points or not. See FOB (location) below.
Term
Break-even analysis
Definition
A method for determining the number of units that a firm must produce and sell at a given price to cover all its costs.
Term
Break-even point
Definition
The point at which the total revenue and total costs are equal and beyond which the company makes a profit; below that point, the firm will suffer a loss.
Term
Captive pricing
Definition
A pricing tactic for two items that must be used together; one item is priced very low, and the firm makes its profit on another, high-margin item essential to the operation of the first item (HP ink-jet cartridges, Sony RAM)
Term
Contribution per unit
Definition
The contribution from each sale to fixed costs and profits. The difference between the price the firm charges for a product and the variable costs.
Term
Cost-plus pricing
Definition
A method of setting prices in which the seller totals all the costs for the product and then adds the amount to arrive at the selling price.
Term
Cross-elasticity of demand
Definition
When changes in the price of one product affect the demand for another item. For ex: when sales of gelatto or sherbert  go down, the sales of ice-cream fall as well.
Term
Demand-based pricing
Definition
A price-setting method based on estimates of demand at different prices.
Term
Dynamic pricing
Definition
A pricing strategy in which the price can easily be adjusted to meet changes in the marketplace.
Term
Elastic demand
Definition
Demand in which changes in price have large effects on the amount demanded.
Term
F.O.B. (location) pricing
Definition
Mostly a B2B term that is negotiable. Its a pricing tactic. If the terms are FOB Seattle then the selling price includes the cost of loading and transporting the product to Seattle. The customer has to pick up the product in Seattle. If the terms are FOB Pullman, then the sales price includes shipment to Pullman.
Term
Fixed costs
Definition
Costs of production that do not change with the number of units produced.
Term
Freight absorption pricing
Definition
A pricing tactic where the price of product is calculated to include shipping.
Term
Inelastic demand
Definition
Demand for a product in which moderate changes in price have little or no effect on the amount demanded. Ex: coffee shops will continue to buy coffee beans even if the prices doubles (they just pass the cost on to the end consumer)
Term
Internal reference price
Definition
A set price or a price range in consumers’ minds that they refer to in evaluating a product’s price. Prices that are too different from this price are questioned. This phenomenon is an indicant of consumers being very 'programmed'
Term
List price
Definition
The price the end customer is expected to pay as determined by the manufacturer; also referred to as the suggested retail price or MSRP/
Term
Loss leader pricing
Definition
A retail or manufacturer pricing policy of setting prices very low or even below cost on one product or one product line to attract customers into a store. The retail store of mfr will make up the lost earnings on the sale of other products that occur when the consumer is in the store.
Term
Marginal analysis
Definition
A method that uses cost and demand to identify the price that will maximize profits.
Term
Marginal cost
Definition
The increase in total cost that results from producing one additional unit of a product.
Term
Marginal revenue
Definition
The increase in total income or revenue that results from selling one additional unit of a product.
Term
Online auction
Definition
E-commerce that allows shoppers to purchase products through online bidding.
Term
Penetration pricing
Definition
A pricing strategy in which a firm introduces a new product at a very low price to encourage more customers to purchase it.
Term
Predatory pricing
Definition
Illegal pricing strategy in which a company sets a very low price for the purpose of driving competitors out of business.
Term
Prestige products
Definition
Products that have a high price and that appeal to status-conscious consumers.
Term
Price
Definition
The assignment of value, or the amount the consumer must exchange to receive the offering.
Term
Price bundling
Definition
Selling two or more goods or services as a single package for one price.
Term
Price elasticity of demand
Definition
The percentage change in unit sales that results from a percentage change in price. A higher ration (>1.0) indicates a more price inelastic demand.
Term
Price fixing
Definition
The collaboration of two or more firms in setting prices, usually to keep prices high. Airlines used to do this much more.
Term
Price leadership
Definition
A pricing strategy in which one firm first sets its price and other firms in the industry follow with the same or vary similar prices.
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
Quantity discounts
Definition
A pricing discount of charging reduced prices for purchases of larger quantities of a product.
Term
Skimming price
Definition
A very high, premium price that a firm charges for its new, highly desirable product. The idea is to gain sales from the top of the market (those consumers that don't mind paying a premium for the newest innovative product ex: a new phone)
Term
Target costing
Definition
A process in which firms identify the quality and functionality needed to satisfy customers and what price they are willing to pay before the product is designed; the product is manufactured only if the firm can control costs to meet the required price.
Term
Total costs
Definition
The total of the fixed costs and the variable costs for a set number of units produced.
Term
Trade or functional discounts
Definition
Discounts off list price of products to members of the channel of distribution who perform various marketing functions.
Term
Trial pricing
Definition
Pricing a new product low for a limited period of time in order to lower the risk for a customer.
Term
Unfair sales acts
Definition
State laws that prohibit suppliers from selling products below cost to protect small businesses from larger competitors.
Term
Uniform delivered pricing
Definition
A pricing tactic in which a firm adds a standard shipping price to the price for all customers regardless of the location.
Term
Value pricing or everyday low pricing (EDLP)
Definition
A pricing strategy in which a firm sets prices that provide ultimate value to customers.
Term
Variable costs
Definition
The cost of production (raw and processed materials, parts, and labor) that are tied to and vary depending on the number of units produced.
Term
Yield management pricing
Definition
A practice of charging different prices to different customers in order to manage capacity while maximizing revenues.
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