Pricing Concepts and Strategies

Flashcards covering key concepts related to pricing strategies and definitions from the lecture notes.

What is a Price?

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

True Cost Accounting (TCA)

Pricing that captures the ecological and social costs of production and supports fair compensation.

Value-based pricing

Uses the buyers’ perceptions of value rather than the seller’s cost.

Everyday low pricing (EDLP)

Involves charging a constant everyday low price with fewer or no temporary price discounts.

High-low pricing

Involves charging higher prices on an everyday basis but running frequent promotions to temporarily lower prices on selected items.

Value-added pricing

Attaches value-added features and services to differentiate a company’s offers and thus their higher prices.

Cost-based pricing

Prices based on the costs for producing, distributing, and selling the product plus profit.

Cost-plus pricing

Adds a standard markup to the cost of the product.

Break-even pricing

Setting price to break even on costs or to make a target return.

Competition-based pricing

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

Target costing

Starts with an ideal selling price based on consumer value considerations and then targets costs that will ensure that the price is met.

Price elasticity of demand

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

Pure competition

The market consists of many buyers and sellers trading in a uniform commodity.

Monopolistic competition

The market consists of many buyers and sellers who trade over a range of prices because sellers can differentiate their offers.

Oligopolistic competition

The market consists of only a few large sellers.

Pure monopoly

The market is dominated by one seller.