Chapter 9, Marketing, An Introduction; Armstrong and Kotler, 12th edition

Price

The amount of money charged for a product or service, or the sum of the values that customers exchange for the benefits of having or using the product or service

Customer value-based pricing

Setting price based on buyers' perceptions of value rather than on the seller's cost; one of the three major pricing strategies

Good-value pricing

Offering just the right combination of quality and good service at a fair price; one of the two types of value-based pricing

Value-added pricing

Attaching value-added features and services to differentiate a company's offers and charging higher prices; one of the two types of value-based pricing

Cost-based pricing

Setting prices based on the costs of producing, distributing, and selling the product plus a fair rate of return for effort and risk; one of the three major pricing strategies

Fixed costs (overhead)

Costs that do not vary with production or sales level

Variable costs

Costs that vary directly with the level of production

Total costs

The sum of the fixed and variable costs for any given level of production

Cost-plus pricing (markup pricing)

Adding a standard markup to the cost of the product; simplest pricing method; cost-oriented method

Break-even pricing (target return pricing)

Setting price to break even on the costs of making and marketing a product, or setting price to make a target return; cost-oriented pricing

Competition-based pricing

Setting prices based on competitors' strategies, prices, costs, and market offerings; one of the three major pricing strategies

Target costing

Pricing that starts with an ideal selling price, then targets costs that will ensure that the price is met

Demand curve

A curve that shows the number of units the market will buy in a given time period, at different prices that might be charged

Price elasticity

A measure of the sensitivity of demand to changes in price; elastic and inelastic

Market-skimming pricing (price skimming)

Setting a high price for a new product to skim maximum revenues layer by layer from the segments wiling to pay the high price; the company makes fewer but more profitable sales; one of the two new product pricing strategies

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; one of the two new product pricing strategies

Product line pricing

Setting the price steps between various products in a product line based on cost differences between the products, customer evaluation of different features, and competitors' prices; one of the five product mix pricing strategies

Optional-product pricing

The pricing of optional or accessory products along with a main product; one of the five product mix pricing strategies

Captive-product pricing

Setting a price for products that must be used along with a main product, such as blades for a razor and games for a video-game console; one of the five product mix pricing strategies

By-product pricing

Setting a price for by-productsin order to make the main product's price more competitive; one of the five product mix pricing strategies

Product bundle pricing

Combining several products and offering the bundle at a reduced price; one of the five product mix pricing strategies

Discount

A straight reduction in price on purchases during a stated period of time or in larger quantities

Allowance

Promotional money paid by manufacturers to retailers in return for an agreement to feature the manufacturer's products in some way

Segmented pricing

Selling a product or service at two or more prices, where the difference in prices is not based on differences in costs

Psychological pricing

Pricing that considers the psychology of prices and not simply the economics; the price is used to say something about the product

Reference prices

Prices that buyers carry in their minds and refer to when they look at a given product

Promotional pricing

Temporarily pricing products below the list price, and sometimes even below cost, to increase short-run sales

Dynamic pricing

Adjusting prices continually to meet the characteristics and needs of individual customers and situations