Marketing Chapter 14 Key terms

above-, at-, or below-market pricing

Setting a market price for a product or product class based on a subjective feel for the competitors’ price or market price as the benchmark.

basing-point pricing

Selecting one or more geographical locations (basing point) from which the list price for products plus freight expenses are charged to the buyer.

bundle pricing

Marketing two or more products in a single package price.

cost-plus pricing

Summing the total unit cost of providing a product or service and adding a specific amount to the cost to arrive at a price.

customary pricing

Setting a price that is dictated by tradition, a standardized channel of distribution, or other competitive factors.

dynamic pricing policy

Setting different prices for products and services in real time in response to supply and demand conditions. Also called a flexible-price policy.

everyday low pricing (EDLP)

The practice of replacing promotional allowances with lower manufacturer list prices.

experience curve pricing

A method of pricing based on the learning effect, which holds that the unit cost of many products and services declines by 10 percent to 30 percent each time a firm’s experience at producing and selling them doubles.

fixed-price policy

Setting one price for all buyers of a product or service. Also called a one-price policy.

FOB origin pricing

The “free on board” (FOB) price the seller quotes that includes only the cost of loading the product onto the vehicle and specifies the name of the location where the loading is to occur (seller’s factory or warehouse).

loss-leader pricing

Deliberately selling a product below its customary price, not to increase sales, but to attract customers’ attention to it in hopes that they will buy other products with large markups as well.

odd-even pricing

Setting prices a few dollars or cents under an even number.

penetration pricing

Setting a low initial price on a new product to appeal immediately to the mass market.

predatory pricing

Charging a very low price for a product with the intent of driving competitors out of business.

prestige pricing

Setting a high price so that quality- or status-conscious consumers will be attracted to the product and buy it.

price discrimination

Charging different prices to different buyers for products of like grade and quality.

price fixing

A conspiracy among firms to set prices for a product.

price lining

Setting the price of a line of products at a number of different specific pricing points.

price war

Successive price cutting by competitors to increase or maintain their unit sales or market share.

product-line pricing

Setting prices for all items in a product line to cover the total cost and produce a profit for the complete line, not necessarily for each item.

promotional allowances

Cash payments or an extra amount of “free goods” awarded sellers in the marketing channel for undertaking certain advertising or selling activities to promote a product.

quantity discounts

Reductions in unit costs for a larger order.

skimming pricing

Setting the highest initial price that customers really desiring the product are willing to pay when introducing a new or innovative product.

standard markup pricing

Adding a fixed percentage to the cost of all items in a specific product class.

target pricing

Consists of (1) estimating the price that ultimate consumers would be willing to pay for a product, (2) working backward through markups taken by retailers and wholesalers to determine what price to charge wholesalers, and then (3) deliberately adjusting the composition and features of the product to achieve the target price to consumers.

target profit pricing

Setting an annual target of a specific dollar volume of profit.

target return-on-investment

Setting a price to achieve an annual target return on investment (ROI).

target-return-on-sales pricing

Setting a price to achieve a profit that is a specified percentage of the sales volume.

uniform delivered pricing

The price the seller quotes that includes all transportation costs.

yield management pricing

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