Marketing: Pricing Strategies Flashcards

Flashcards reviewing pricing strategies and related concepts from a marketing lecture.

Price

Amount of money charged for a product or service; it determines a firm’s market share and profitability and produces revenue.

Customer Value-Based Pricing

Pricing based on buyers’ perceptions of value rather than on the seller’s cost.

Good-value pricing

Offers just the right combination of quality and good service at a fair price.

Value-added pricing

Involves attaching value-added features and services to differentiate a company’s offers and then charging higher prices.

Cost-Based Pricing

Pricing based on the costs of producing, distributing, and selling the product plus a fair rate of return for effort and risk.

Fixed Costs (Overhead)

Costs that do not vary with production or sales level.

Variable Costs

Costs that vary directly with the level of production.

Total Costs

The sum of the fixed and variable costs for any given level of production.

Cost-plus pricing (markup pricing)

Adding a standard markup to the cost of the product.

Break-even pricing (target return pricing)

Setting price to break even on the costs of making and marketing a product, or setting price 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, then targets costs that ensure the price is met.

Pure competition

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

Monopolistic competition

Consists of many buyers and sellers trading over a range of prices rather than a single market price.

Oligopolistic competition

Consists of only a few large sellers.

Pure monopoly

Market is dominated by one seller.

Price Elasticity of Demand

Measure of the sensitivity of demand to changes in price.

Inelastic demand

Demand hardly changes with a small change in price.

Elastic demand

Demand changes greatly with a small change in price.

Market-skimming pricing (price skimming)

Setting a high price to skim maximum revenues from the segments willing to pay the high price.

Market-penetration pricing

Setting a low price to attract a large number of buyers and a large market share.

Product line pricing

Setting prices across an entire product line.

Optional-product pricing

Pricing optional or accessory products sold with the main product.

Captive-product pricing

Pricing products that must be used with the main product.

By-product pricing

Pricing low-value by-products to get rid of or make money on them.

Product bundle pricing

Pricing bundles of products sold together.

Discount and allowance pricing

Reducing prices to reward customer responses such as volume purchases, paying early, or promoting the product.

Segmented pricing

Adjusting prices to allow for differences in customers, products, or locations.

Psychological pricing

Adjusting prices for psychological effect.

Promotional pricing

Temporarily reducing prices to spur short-run sales.

Geographical pricing

Adjusting prices to account for the geographic location of customers.

Dynamic pricing

Adjusting prices continually to meet the characteristics and needs of individual customers and situations.

International pricing

Adjusting prices for international markets.

Discount

A straight reduction in price on purchases during a stated period of time or of larger quantities.

Allowance

Promotional money paid to retailers for an agreement to feature the manufacturer’s products in some way.

Segmented Pricing

Selling a product or service at two or more prices, where the difference in prices is not based on differences in costs

Dynamic pricing

Adjusting prices continually to meet the characteristics and needs of individual customers and situations

Reference Price

Prices that buyers carry in their minds and refer to when looking at a given product.

Loss-leader pricing

Products are sold below cost to attract customers to the store in the hope that they will buy other items at normal markups.

Uniform-delivered pricing

The company charges the same price plus freight to all customers, regardless of their location.

Zone pricing

The company sets up two or more zones. All customers within a zone pay the same total price; the more distant the zone, the higher the price.

FOB-origin pricing

The customer pays the freight from the factory to the destination.

Basing-point pricing

The seller designates some city as a basing point and charges all customers the freight cost from that city to the customer location, regardless of the city from which the goods are actually shipped.

Price fixing

Federal legislation on price-fixing states that sellers must set prices without talking to competitors.

Predatory pricing

Selling below cost with the intention of punishing a competitor or gaining higher long-run profits through driving competitors out of business.

Deceptive pricing

Stating prices or price savings that mislead consumers, or are not actually available to consumers

Retail price maintenance

A manufacturer cannot require dealers to charge a specified retail price for its product.

Robinson-Patman Act

Seeks to ensure that sellers offer the same price terms to customers at a given level of trade.

Value Delivery Network

A network composed of the company, suppliers, distributors, and, ultimately, customers who partner with each other to improve the performance of the entire system in delivering customer value.

Marketing Channel (Distribution Channel)

A set of interdependent organizations that help make a product or service available for use or consumption by the consumer or business user.

Channel Conflict

Disagreements among marketing channel members on goals, roles, and rewards—who should do what and for what rewards.

Conventional Distribution Channel

A channel consisting of one or more independent producers, wholesalers, and retailers, each a separate business seeking to maximize its own profits, perhaps even at the expense of profits for the system as a whole.

Vertical Marketing System (VMS)

A distribution channel structure in which producers, wholesalers, and retailers act as a unified system. One channel member owns the others, has contracts with them, or wields so much power that they all cooperate.

Corporate VMS

A vertical marketing system that combines successive stages of production and distribution under single ownership—channel leadership is established through common ownership.

Contractual VMS

A vertical marketing system in which independent firms at different levels of production and distribution join together through contracts to obtain more economies or sales impact than they could achieve alone.

Franchise Organization

A contractual vertical marketing system in which a channel member called a franchisor links several stages in the production-distribution process.

Administered VMS

A vertical marketing system that coordinates successive stages of production and distribution through the size and power of one of the parties.

Horizontal Marketing System

A channel arrangement in which two or more companies at one level join together to follow a new marketing opportunity.

Multichannel Distribution System

A distribution system in which a single firm sets up two or more marketing channels to reach one or more customer segments.

Disintermediation

Cutting out marketing channel intermediaries by product or service producers or the displacement of traditional resellers by radical new types of intermediaries.

Marketing Channel Design

Designing effective marketing channels by analyzing customer needs, setting channel objectives, identifying major channel alternatives, and evaluating those alternatives.

Intensive Distribution

Stocking the product in as many outlets as possible.

Exclusive Distribution

Giving a limited number of dealers the exclusive right to distribute the company’s products in their territories.

Selective Distribution

The use of more than one but fewer than all of the intermediaries who are willing to carry the company’s products.

Marketing Channel Management

Selecting, managing, and motivating individual channel members and evaluating their performance over time.

Supply Chain Management

Managing upstream and downstream value-added flows of materials, final goods, and related information among suppliers, the company, resellers, and final consumers.

Third-Party Logistics (3PL) Provider

An independent logistics provider that performs any or all of the functions required to get a client’s product to market.