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Ch. 14 Marketing
Terms in this set (38)
Overall sacrifice a consumer is willing to make to acquire a specific product or service.
Focuses on target profit pricing, maximizing profits, and target return pricing.
Target Profit Pricing
When firms have a particular profit goal as overriding concern.
Relies on creating a mathematical model that captures all factors that identify price at which profits are maximized.
When firms increase sales to increase profits.
When companies deliberately set prices higher than competitors to focus on customers who care more about quality than price.
When firms measure themselves against competition.
When firms set prices similar to major competition.
Status quo pricing
When firms change prices only when competitors change prices; ex. American Airline drops prices, so Delta drops prices and vice versa.
When firm sets pricing strategy based on how it can add value to products and services.
Shows how many units of a product or service consumers will demand at different prices; can be straight or curved.
Products/services consumers purchase for status rather than price; demand curve is ")" shaped. ex. jewelers.
Price elasticity of demand
Measures how changes in price affect quantity of product demanded.
Price elasticity of demand formula
% change in quantity demanded ÷ % change in price
Factors that influence Price elasticity of demand
Income, substitution, cross-price elasticity.
As consumer's income rises, purchase more luxury goods and vice versa.
Refers to consumers ability to substitute a product for other brands.
% change in quantity of one product compared to another; determines whether products are complementary or substitute.
Products whose demands are positively related; ex. Blu Ray players and Blu Ray discs.
Products whose demands are negatively related; ex. DVD and Blu Ray.
Costs that vary with product volume; employees and materials.
Costs that remain the same regardless of changes in volume; rent, utility, insurance.
Sum of variable costs and fixed costs.
Technique that enables managers to examine relationships among cost, price, revenue, and profit over different levels of production and sales.
Point at which number of units solids is just enough to cover costs; zero profits. Formula is Fixed Costs / Contributions per unit.
Contribution per unit
Price minus variable cost per unit.
Mark up target return price
Formula that calculates price at certain mark-up;
Target return price= (variable cost+(fixed cost/expected unit sales)) •(1+Target return %)
Levels of competition
One firm provides specific product or service in particular industry.
A few firms dominate market; price war and predatory pricing can occur.
When two firms compete by lowering their prices.
When firm sets certain product price very low in hopes of driving out competition.
When abundance of firms in market compete by differentiating products. Most common form of competition. Appeals to customers more than price competition.
Large number of sellers of standardized products such as grain or meat; firms must identify themselves as unique.
Manufacturers, wholesalers, and retailers; can have different views on pricing strategies; must communicate goals and select channel partners that agree with them.
When customers visit a store to touch, feel, and even discuss product's features with sales associate and then purchase product online.
This set is often in folders with...
Unit 5 Chapter 15
Unit 5 Chapter 16
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