Marketing Management: Pricing Strategies

A collection of vocabulary flashcards focusing on key concepts and definitions related to pricing strategies in marketing management.

Cost-based pricing

A pricing strategy where a margin is added to the cost of the product to determine its selling price.

Value-based pricing

A pricing strategy that sets prices primarily, but not exclusively, based on a customer's perceived value of the product.

Economic Value to Customer (EVC)

The highest price that a consumer is willing to pay for a product, based on the value differential between the product and its reference product.

Price discrimination

The practice of charging different prices to different customers for the same product, based on their willingness to pay.

First degree price discrimination

A pricing strategy where each customer is charged according to their individual valuation, allowing firms to capture all consumer surplus.

Second degree price discrimination

A pricing strategy where customers self-select between different price plans based on their preferences.

Third degree price discrimination

A pricing strategy where customers are charged different prices based on observable characteristics correlated with their willingness to pay.

Incentive Compatibility (IC)

A condition in pricing strategies where customers must prefer the product aimed at their group over others.

Individual Rationality (IR)

A condition in which customers must have a non-negative surplus from purchasing the product aimed at their group.

Deadweight loss

Lost profit opportunities that occur when a single price is charged, preventing firms from capturing all potential profits across different consumer segments.