Chapter 9 Terms

key terms for ch. 9 lol

above-, at-, below-market pricing

the price customers are generally
willing to pay not necessarily set by the company

break-even analysis

relationship between total revenue + cost to determine profitability at different output levels

bundle pricing

based on the idea that consumers value the package more than individual items

cost-plus

summing the total unit cost of providing a product/service + adding a specific amount to the cost to arrive at a price

customary pricing

standardized channel of distribution/other competitive factors dictate the price

demand curve

quantity sold and price graph showing how many units will be sold at a given price

dumping

when a firm sells a product in a foreign country below its domestic prices or below its actual cost

fixed cost

Costs that do not change with production or sales level

grey market

situations where products are sold through unauthorized channels of distribution.

loss leader

a product sold at a loss to attract customers

markup

difference between selling price and cost, usually expressed as a percentage of cost

odd-even pricing

setting prices a few dollars/cents under an even number

penetration pricing

setting a lower, affordable initial price on a new product to appeal to the mass market

prestige pricing

setting a high price so that status-conscious consumers are attracted to the product

pricing constraints

Factors that limit the range of price a firm may set

pricing objectives

Specified expectations of the price role in an organization’s marketing and strategic plans

profit equation

profit = total revenue – total cost.

skimming

setting the highest initial price that desired customers are willing to pay

standard markup

difference between selling price + cost divided by cost

target pricing

manufacturer adjusts the composition + features of a product to achieve the target price to consumers

target profit pricing

firm sets annual target of a specific dollar amount of profit

target ROI pricing

set prices to achieve a percentage mandated by board of directors/regulators

total cost

total expenses incurred by a firm in producing + marketing a product; total cost is the sum of fixed cost and variable costs

total revenue

total money received from the sale of a product

variable cost

Costs that vary directly with levels of production

value

ratio of perceived benefits to price

yield management pricing

charging of different prices to maximize revenue for a set amount of capacity at any given time