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Chapter 12

Pricing Concepts and Management Marketing

TermDefinition
price competition emphasizing price as an issue and matching or beating competitors' prices
nonprice competition emphasizing factors other than price to distinguish a product from competing brands
pricing objectives goals that describe what a firm wants to achieve through pricing
demand curve a graph of the quantity of products a firm expects to sell at various prices if other factors remain constant
price elasticity of demand a measure of the sensitivity of demand to changes in price
fixed costs costs that do not vary with changes in the number of units produced or sold
average fixed cost the fixed cost per unit produced
variable costs costs that vary directly with changes in the number of units produced or sold
average variable cost the variable cost per unit produced
total cost the sum of average fixed and average variable costs, times the quantity produced
average total cost the sum of the average fixed cost and the average variable cost
marginal cost (MC) the extra cost incurred by producing one more unit of a product
marginal revenue (MR) the change in total revenue resulting from the sale of an additional unit of a product
breakeven point the point at which the costs of producing a product equal the revenue made from selling the product
cost-based pricing adding a dollar amount or a percentage of the cost to the cost of the product to establish the price
cost-plus pricing adding a percentage of the manufacturer's total cost to that total cost to establish the price of a custom-made product
markup pricing adding to the costs of the product a predetermined percentage of that cost
demand-based pricing pricing based on the level of demand for the product
competition-based pricing pricing influenced primarily by competitor's prices
price skimming charging the highest possible price that buyers who most desire the product will pay
penetration pricing setting prices below those of competing brands to penetrate a market and gain a significant market share quickly
differential pricing charging different prices to different buyers for the same quality and quantity of product
negotiated pricing establishing a final price through bargaining between seller and customer
secondary-market pricing setting one price for the primary target market and a different price for another market
periodic discounting temporary reduction of prices on a patterned or systematic basis
random discounting temporary reduction of prices on an unsystematic basis
psychological pricing strategies that encourage purchases based on consumers' emotional responses, rather than on economically rational ones
odd-number pricing the strategy of setting prices using odd numbers that are slightly below whole-dollar amounts
multiple-unit pricing the strategy of setting a single price for two or more units
reference pricing pricing a product at a moderate level and positioning it next to a more expensive model or brand
bundle pricing packaging together two or more complementary products and selling them for a single price
everyday low prices (EDLPs) setting a low price for products on a consistent basis
customary pricing pricing on the basis of tradition
captive pricing pricing the basic product in a product line low, but pricing related items at a higher level
premium pricing pricing the highest-quality or most versatile products higher than other models in the product line
price lining the strategy of selling goods only at certain predetermined prices that reflect definite price breaks
price leaders products priced below the usual markup, near cost, or below cost
special event pricing advertised sales or price cutting linked to a holiday, season, or event
comparison discounting setting a price at a specific level and comparing it with a higher price
geographic pricing reductions for transportation and other costs related to the physical distance between buyer and seller
transfer pricing prices charged in sales between an organization's units
discount a deduction from the price of an item
Created by: hallie999
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