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Chapter 13 retailing
Terms in this set (38)
The ratio of what customers receive (the perceived benefit of the products and services offered by the retailer) to what they have to pay for it.
a strategy in which retailers offer prices that are sometimes above their competitions everyday low price, but they use advertising to promote frequent sales ( offer weekly discounts through sales promotions)
A pricing strategy that stresses continuity of retail prices at a level somewhere between the regular console price and the deep-discount sale price of the retailers competitors
everyday low pricing strategy
A policy that guarantees that the retailer will have the lowest possible price for a product or group of products and usually promises to match or better any lower price found in the local market
low-price guarantee policy
A measure of the effect a price change has on consumer demand; percentage change in demand divided by percentage change in price
When a 1 percent decrease in price produces less than a 1 percent increase in the quantity sold (price insensitive)
when a 1 percent decrease in price produces more than a 1 percent increase in the quantity sold (price sensitive)
Difference between the retail price and the cost of an item. The increase in the retail price of an item after the initial markup percentage has been applied but before the item is placed on the selling floor.
the markup as a percentage of the retail price
A method of setting retail prices in which retailers simply double the cost of the merchandise to obtain the original retail selling price
An inventory reduction that is caused by shoplifting by employees or customers, by merchandise being misplaced or damaged, or by poor bookkeeping.
inventory shrinkage (or shrinkage)
Includes three things: markdowns, discounts to employees and customers; inventory shrinkage due to shoplifting, breakage or loss.
reduce the actual selling price from the initial sales price
the retail selling price initially placed on the merchandise less the cost of goods sold
the amount of markup the retailer wishes to maintain on a particular category of merchandise. Net sales minus cost of goods sold
a technique that evaluates the relationship between total revenue and total cost to determine profitability at various sales levels.
the quantity at which total revenue equals total cost beyond which profit occurs
break-even point quantity
Costs that are stable and don't change with the quantity of product produced and sold
costs that vary with the level of sales and can be applied directly to the decision in question
A type of software program that uses a set of algorithms that analyzes past and current merchandise sales and prices, estimates the relationship between prices and sales generated, and then determines the optimal (most profitable) initial price for the merchandise and the appropriate size and timing of markdowns.
pricing optimization software.
offering localized promotions for retailers in close proximity to the customer, as determined by phone location technology
the percentage reduction in the initial sales price
Funds a vendor gives the retailer to cover lost gross margin dollars that result from markdowns and other merchandising issues.
charging different prices for the same offerings, depending on the time, season, customer, or level of demand.
dynamic pricing (individualized pricing)
Documents that entitle the holder to a reduced price or X cents off the actual price of a product or service
Practice of offering two or more different products or services for sale at one price(Mcdonalds uses this when it combines an extra sandwich, French fries, and a soft drink in an extra value meal. Offers extra value meal at a discount compared with buying items individually)
policy of granting lower prices for higher quantities.
quantity discount (multiple-unit pricing)
Charging different prices for the same merchandise in different geographic locations to be competitive in local markets.
A pricing strategy in which certain items are priced lower than normal to increase the traffic flow of customers or to increase the sale of complementary products
an item priced near or below cost to attract customer traffic into the store
Customers visiting a store and buying only merchandise sold at big discounts or buying only the best styles or colors
A pricing policy in which a retailer offers a limited number of predetermined price points within a classification, releases multiple versions of the same product or service at different price points simultaneously
The practice of ending prices with an odd number (such as 69 cents) or just under a round number (such as $98 instead of $100)
A price point in the consumers memory for a good or service that can consist of the last price last paid, the price most frequently paid, or the average of all prices customers have paid for similar offerings, A benchmark for what consumers believe the "real" price of the merchandise should be.
A method for establishing merchandise prices for the purpose of driving competition from the marketplace. (drives retailers out of business)
An agreement between retailers in direct competition with each other to charge the same prices
horizontal price fixing
An unlawful deceptive practice that lures customers into a store by advertising a product at lower than usual prices (the bait), then induces the customers to switch to a higher price model (the switch)
bait and switch
a promise to customers to sell currently out of stock merchandise at the advertised sale price when it arrives
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