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price

that which is given up in an exchange to acquire a good or service

revenue

the price charged to customers multiplied by the number of units sold

profit

revenue minus expenses

return on investment (ROI)

net profit after taxes divided by total assets

market share

a company's product sales as a percentage of total sales for that industry

status quo pricing

a pricing objective that maintains existing prices or meets the competition's prices

demand

the quality of a product that will be sold in the market at various prices for a specified period

supply

the quantity of a product that will be offered to the market by a supplier at various prices for a specified period

elasticity of demand

consumers' responsiveness or sensitivity to changes in price

elastic demand

a situation in which consumer demand is sensitive to changes in price

inelastic demand

a situation in which an increase or a decrease in price will not significantly affect demand for the product

yield management systems (YMS)

a technique for adjusting prices that uses complex mathematical software to profitably fill unused capacity by discounting early purchases, limiting early sales at these discount prices, and overbook capacity

variable cost

a cost that varies with chances in the level of output

fixed cost

a cost that does not change as output is increased or decreased

markup pricing

the cost of buying the product from the producer plus amounts for profit and for expenses not otherwise accounted for

break-even analysis

a method of determining what sales volume must be reached before total revenue equals total costs

prestige pricing

charging a high price to help promote a high-quality image

price strategy

a basic, long-term pricing framework, which establishes the initial price for a product and the intended direction for price movements over the product life cycle

price skimming

a pricing policy whereby a firm charges a high introductory price, often coupled with heavy promotion

penetration pricing

a pricing policy whereby a firm charges a relatively low price for a product initially as a way to reach the mass market

unfair trade practice acts

laws that prohibit wholesalers and retailers from selling below cost

price fixing

an agreement between two or more firms on the price they will charge for a product

predatory pricing

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

base price

the general price level at which the company expects to sell the good or service

quantity discount

a price reduction offered to buyers buying in multiple units or above specified dollar amount

cumulative quantity discount

a deduction from list price that applies to the buyer's total purchases made during a specific period

noncumulative quantity discount

a deduction from list price that applies to a single order rather than to the total volume of orders placed during a certain period

cash discount

a price reduction offered to a consumer, an industrial user, or a marketing intermediary in return for prompt payment of a bill

functional discount (trade discount)

a discount to wholesalers and retailers for performing channel functions

seasonal discount

a price reduction for buying merchandise out of season

promotional allowance (trade allowance)

a payment to a dealer for promoting the manufacturer's products

rebate

a cash refund given for the purchase of a product during a specified period

value-based pricing

setting the price at a level that seems to the customer to be a good price compared to the prices of other options

FOB origin pricing

a price tactic that requires the buyer to absorb the freight costs from the shipping point ("free on board")

uniform delivered pricing

a price tactic in which the seller pays the actual freight charges and bills every purchaser an identical, flat freight charge

zone pricing

a modification of uniform delivered pricing that divides the United States (or the total market) into segments or zones and charges a flat freight rate to all customers in a given zone

freight absorption pricing

a price tactic in which the seller pays all or part of the actual freight charges and does not pass them on to the buyer

basing-point pricing

a price tactic that charges freight from a given (basing) point, regardless of the city from which the goods are shipped

single-price tactic

a price tactic that offers all goods and services at the same price (or perhaps two or three prices)

flexible pricing (variable pricing)

a price tactic in which different customers pay different prices for essentially the same merchandise bought in equal quantities

leader pricing (loss-leader pricing)

a price tactic in which a product is sold near or even below cost in hope that shoppers will buy other items once they are in the store

bait pricing

a price tactic that tries to get consumers into a store through false or misleading price advertising and then uses high-pressure selling to persuade consumers to buy more expensive merchandise

odd-even pricing (psychological pricing)

a price tactic that uses odd-numbered prices to connote bargains and even-number prices to imply quality

price bundling

marketing two or more products in a single package for a special price

unbundling

reducing the bundle of services that comes with the basic product

two-part pricing

a price tactic that charges two separate amounts to consume a single good or service

consumer penalty

an extra fee paid by the consumer for violating the terms of the purchase agreement

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