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Marketing Module 13
Terms in this set (40)
The amount of money charged for a product or service
Supply and Demand
Price is determined by:
Customer value-based pricing
Setting price based on buyers' perceptions of value rather than on the seller's cost.
Good value pricing
Offering just the right combination of quality and good service at a fair price.
Every Day Low Pricing
charging a constant, everyday low price with few or no temporary price discounts
Ex: Walmart, Aldi's
High Low Pricing
charging higher prices on an everyday basis but running frequent promotions to lower prices temporarily on selected items
Attaching value-added features and services to differentiate a company's offers and charging higher prices.
Setting prices based on the costs of producing, distributing, and selling the product plus a fair rate of return for effort and risk.
Sellers are certain about costs
Price competition is minimized
Buyers feel it is fair
Pros of cost-based pricing method
Ignores demand and competitor pricing
Doesn't cover customer's value perception
Cons of cost-based pricing methods
Fixed costs (overhead)
costs that do not vary with production or sales level
fixed cost + variable cost
Total cost = ___________ + _____________
Costs that vary directly with the level of production
The sum of the fixed and variable costs for any given level of production
Experience (learning) curve
The drop in the average per-unit production cost that comes with accumulated production experience
Cost-plus pricing (markup pricing)
Adding a standard markup to the cost of the product
Variable cost + (fixed cost/unit sales)
With the Cost-plus pricing method, unit cost =
unit cost/(1 - desired return on sales)
With the Cost-plus pricing method, markup price =
Setting price to break even on the costs of making and marketing a product or setting price to make a target return.
The amount of units needed to be sold in order for total revenue to cover total cost
Competition based pricing
Setting prices based on competitors' strategies, prices, costs, and market offerings
Marketing skimming pricing
Setting a high price for a new product to skim maximum revenues layer by layer from the segments willing to pay the high price
The company makes fewer but more profitable sales
Market penetration pricing
Setting a low price for a new product in order to attract a large number of buyers and a large market share
Product line pricing
Product bundle pricing
Product Mix pricing strategies
Demand is sensitive to price changes means it has
Demand is not sensitive to price changes means it has
Price Adjustment Strategies
A straight reduction in price on purchases during a stated period or time or larger quantities
Promotional money paid by manufacturers to retailers in return for an agreement to feature the manufacturer's products in some way
Selling a product or service at two or more prices, where the difference in prices is not based on differences in costs
Pricing that considers the psychology for prices and not simply the economics; the price is used to say something about the product.
Prices that buyers carry in their minds and refer to when they look at a given product.
Temporarily pricing products below the list price, and sometimes even below cost, to increase short-run sales
Setting prices for customers located in different parts of the country or world
FOB origin pricing
Pricing in which goods are placed free on board a carrier; the customer pays the freight from the factory to the destination.
Pricing in which the company charges the same price plus freight to all customers, regardless of their location.
Pricing in which the company sets up two or more zones. All customers within a zone pay the same total price; the more distant the zone, the higher the price.
Pricing in which the seller designates some city as a basing point and charges all customers the freight cost from that city to the customer.
Pricing in which the seller absorbs all or part of the freight charges in order to get the desired business.
Adjusting prices continually to meet the characteristics and needs of individual customers and situations.
This set is often in folders with...
Marketing Module 11
Marketing Module 12
Marketing Module 14
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