Learning Outcomes / Key Terms (CMMS)

Bait pricing

A price tactic that tries to get consumers into a store through false or  misleading price advertising and then uses high-pressure selling to persuade  consumers to buy more expensive merchandise.

Base price

 The general price level at which the company expects to sell the good  or service.  

Basing-point pricing

A price tactic that charges freight from a given (basing)  point, regardless of the city from which the goods are shipped.

Break-even analysis

l A method of determining what sales volume must be  reached before total revenue equals total cost.  

Cash discount –

A price reduction offered to a consumer, an industrial user, or a  marketing intermediary in return for prompt payment of a bill.

Consumer penalty

An extra fee paid by the consumer for violating the terms of  the purchase agreement.

 Cumulative quantity discount

A deduction from the list price that applies to the  buyer’s total purchases made during a specific period.

Demand

The quantity of a product that will be sold in the market at various prices  for a specific period.

Dynamic pricing

The ability to change prices very quickly, often in real-time,  using software programs.

Elastic demand

A situation in which consumer demand is sensitive to changes in  price.

l Extranet

A private electronic network that links a company with its suppliers and  customers.

l Fixed cost

A cost that does not change as output is increased or decreased.

Flexible pricing (variable pricing)

A price tactic in which different customers  pay different prices for essentially the same merchandise bought in equal quantities.

l FOB origin pricing

A price tactic that requires the buyer to absorb the freight  costs from the shipping point (“free on board”).

 Freight absorption pricing

A price tactic in which the seller pays all or part of the actual freight charges and does not pass them on to the buyer.

Functional discount(trade discount

A discount to wholesalers and retailers  for performing channel functions.

Inelastic demand

A situation in which an increase or decrease in price will not  significantly affect the demand for the product.

l Keystoning

The practice of marking up prices by 100 percent or doubling the  cost.

Leader pricing (loss-leader pricing)

A price tactic in which a product is sold  near or even below cost in the hope that shoppers will buy other items once they  are in the store.

Market share

A company’s product sales as a percentage of total sales for that  industry.

Markup pricing

The cost of buying the product from the producer, plus amounts  for profit and for expenses not otherwise accounted for.  

 Noncumulative quantity discount

A deduction from the list price that applies to  a single order rather than to the total volume of orders placed during a certain  period.

Odd-even pricing (psychological pricing)

A price tactic that uses odd  numbered prices to connote bargains and even-numbered prices to imply quality.

Penetration pricing

A pricing policy whereby a firm charges a relatively low price  for a product when it is first rolled out as a way to reach the mass market.  

Predatory pricing

The practice of charging a very low price for a product with  the intent of driving competitors out of business or out of a market.

Price

That which is given up in an exchange to acquire a good or service.

l Price bundling –

Marketing two or more products in a single package for a special  price.

Price fixing

An agreement between two or more firms on the price they will  charge for a product.

Price lining

The practice of offering a product line with several items at specific  price points.

Price skimming

A pricing policy whereby a firm charges a high introductory  price, often coupled with heavy promotion.

Price strategy

 A basic, long-term pricing framework that establishes the initial  price for a product and the intended direction for price movements over the product  life cycle.

Profit

Revenue minus expenses

Promotional allowance (trade allowance)

l A payment to a dealer for  promoting the manufacturer’s products.

Quantity discount

A price reduction offered to buyers purchasing in multiple  units or above a specified dollar amount.

Rebate

A cash refund given for the purchase of a product during a specific  period

Return on Investment(ROI)

Net profit after taxes divided by total assets.

Revenue

l The price charged to customers multiplied by the number of units sold.

Seasonal discount

l A price reduction for buying merchandise out of season.

Status quo pricing

l A pricing objective that maintains existing prices or meets the  competition’s prices.

Single-price tactic

l A price tactic that offers all goods and services at the same  price (or perhaps two or three prices).

Supply

l The quantity of a product that will be offered to the market by a supplier at  various prices for a specific period.

Surge pricing

l  Occurs in a fluid market, where demand changes rapidly, often  hourly. When demand increases, so do prices, and vice versa.

Two-part pricing

 A price tactic that charges two separate amounts to consume a single good or service.

Unfairtrade practice acts

Laws that prohibit wholesalers and retailers from  selling below cost.

Uniform delivered pricing

A price tactic in which the seller pays the actual freight charges and bills every purchaser an identical, flat freight charge.

Value-based pricing

Setting the price at a level that seems to the customer to be  a good price compared to the prices of other options.

Variable cost

A cost that varies with changes in the level of output.

Zone pricing

 A modification of uniform delivered pricing that divides the United  States (or the total market) into segments or zones and charges a flat freight rate to  all customers in a given zone.