Chapter 11: Pricing MKTG

Final Exam Chapter

Price reflects

The value delivered to consumers and the value captured for the firm

The two ways a company can increase revenue are

Sell more products or raise prices

Revenue is calculated as

Units sold × price

Profit is calculated as

Revenue – costs

Profit maximization (price skimming) means

Setting a high price at launch

Volume maximization (penetration pricing) means

Setting a low price to encourage high volume

Survival pricing means

Pricing to just cover costs during difficult times

Price is defined as

The amount of money, time, or effort a buyer exchanges to obtain a product

The objective of strategic pricing is

Profitability

Step 1: Profit maximization is also called

Price skimming

Step 1: Volume maximization is also called

Penetration pricing

Step 1: Survival pricing means

Pricing to just cover costs during difficult times

Price sensitivity refers to

How much price affects purchasing behavior

Price elasticity of demand measures

How quantity demanded changes in response to price changes

Inelastic demand means

A price change causes little change in demand

Elastic demand means

Demand changes significantly with a small price change

Fixed costs are

Costs that remain constant regardless of units produced

Variable costs are

Costs that vary with the number of units produced

Break‑even analysis calculates

The sales volume needed to achieve zero profit

Break‑even point occurs when

Revenue = cost

A firm may price higher than competitors when

It offers a superior product

Reference prices are

Prices consumers consider fair and reasonable

Underpricing means

Charging less than customers are willing to pay

Unbundling means

Separating products/services and pricing each individually

An escalator clause protects firms from

Increases in costs or decreases in availability

Shrinkflation means

Shrinking product size while keeping price the same or higher

Profit margin is

The amount a product sells for above total cost

Markup (cost‑plus) pricing means

Adding a set amount to cost to determine price

Odd pricing means

Pricing slightly below the next dollar amount

Prestige pricing means

Pricing high to signal high quality

Seasonal discounts are used to

Lower prices during off‑season

Price bundling means

Selling two or more products together at one price

Dynamic pricing means

Constantly updating prices based on supply, demand, or market conditions

Name‑your‑own‑price auctions allow customers to

Submit a bid and let the system match it with suppliers