Principles of Marketing - Chapter 10: Pricing

This set of flashcards covers the major concepts discussed in Chapter 10 of the Principles of Marketing, focusing on pricing strategies and their implications.

Price

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

Price as a Signal

Prices can indicate product quality; a price set too low may signal poor quality, while a price set too high might signal low value.

Value-Based Pricing

A pricing strategy that uses the buyers’ perceptions of value rather than the seller’s cost.

Good-Value Pricing

Offering just the right combination of quality and good service at a fair price.

Everyday Low Pricing (EDLP)

Charging a constant everyday low price with few or no temporary price discounts.

Price Floor

The minimum price a product can be sold at without incurring a loss.

Price Ceiling

The maximum price a product can be sold at without losing demand.

Cost-Based Pricing

Setting prices based on the costs for producing, distributing, and selling the product plus a fair rate of return.

Fixed Costs

Costs that do not vary with production or sales levels.

Variable Costs

Costs that vary directly with the level of production.

Competition-Based Pricing

Setting prices based on competitors’ strategies, costs, prices, and market offerings.

Price Elasticity of Demand

A measure of the sensitivity of demand to changes in price.

Inelastic Demand

When demand hardly changes with a small change in price.

Elastic Demand

When demand changes greatly with a small change in price.

Customer Value-Based Pricing

A pricing strategy that aligns the price set with the perceived value of the product by customers.