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Pricing Objectives
The goals set by marketers to guide pricing decisions and strategies.
Market Share Objective
A pricing objective focused on maintaining or increasing a product's sales in relation to total industry sales.
Cash Flow Objective
A pricing objective aimed at recovering cash as quickly as possible.
Status Quo Objective
A pricing objective that de-emphasizes price and can lead to nonprice competition in an industry.
Demand Curve
The relationship between the price of a product and the quantity demanded.
Penetration Pricing
A pricing strategy that helps a company build market share quickly by setting low prices.
Inelastic Demand
A situation where changes in price have a relatively small impact on the quantity demanded.
Price Elasticity of Demand
A measure of sensitivity of demand in relation to changes in price.
Marginal Analysis
Examining the impact on costs and revenues when production is changed by one unit.
Fixed Costs
Costs that do not vary with the level of production or sales.
Breakeven Point
The point at which total revenue equals total costs, resulting in neither profit nor loss.
Variable Costs
Costs that vary with the level of production or sales.
Marginal Cost
The cost of producing one more unit of a product.
Marginal Revenue
The additional revenue generated from selling one more unit of a product.
Profit Maximization
The point at which marginal cost equals marginal revenue.
Sunk Costs
Costs that have already been incurred and cannot be recovered.
Markup Pricing
Setting a price by adding a percentage to the cost of the product.
Cost-Plus Pricing
Setting a price by adding a markup to the cost of the product.
Demand-Based Pricing
Setting prices based on customer demand and willingness to pay.
Demand-based pricing
Setting prices based on the level of demand for a product or service.
Competition-based pricing
Determining prices by considering competitors' prices as a primary factor.
Homogeneous products
Products in an industry that are similar, making price a key factor in purchase decisions.
Price fixing
Setting prices based on competitors' prices rather than costs.
Differential pricing
Charging different prices to different customer segments based on various factors.
Secondary-market pricing
Pricing strategy where products are sold at different prices in different markets.
Negotiated pricing
Setting prices through bargaining or negotiation with customers.
Random discounting
Occasional price reductions without a set pattern.
Price skimming
Setting high initial prices then lowering them over time.
Penetration pricing
Setting low prices to quickly gain market share.
Cost-based strategy
A pricing strategy that determines the price of a product based on the costs involved in producing and distributing it.
Psychological pricing strategy
A pricing technique that focuses on the psychological aspects of consumer behavior, such as perception and emotions, to set prices.
Price leader pricing
A strategy where a product is sold at a lower price than its cost in the hope that sales of other products will increase.
Special-event pricing
A pricing strategy where prices are reduced for a limited time or special occasion to attract customers.
Comparison discounting
Showing a product's price along with its previous price, the price of a competing brand, or the price at another retail outlet to influence consumer decisions.
Periodic discounting
Offering a special package if a prevention plan is purchased within the first 30 days of each year for vaccinations.
Penetration pricing
Pricing strategy where Glenwood would most likely be employing if it priced its basic office visit lower than its competitor.
Markup pricing
Adding a 33.3% markup to the cost of an office visit plus vaccines to determine the price.
The firm’s survival
Factor considered when establishing pricing objectives by the head of sales and marketing.
A status quo pricing objective can reduce a firm’s risks by helping stabilize demand for its products
Best explanation for leaving existing pricing objectives unchanged.
The demand for the company’s products is elastic, so total revenue declines when prices are raised
Explanation for why total revenue declines when prices are raised.
Demand-based pricing
Intending to use the sales volume trends to set prices based on this data.
Periodic discounting
Pricing strategy used to facilitate a model year change for a fleet of autos.
Transfer pricing
Selling products to internal divisions at a price equivalent to a market-based cost.
The importance of price depends on the type of product
True statement about the target market’s evaluation of price.
Total cost is the sum of average fixed costs and average variable costs times the quantity produced
True statement about marginal analysis.
At the breakeven point, the firm’s sales revenue equals the sum of its fixed and variable costs
True statement about breakeven analysis.
This is done in stage three of the price-setting process
True statement about the evaluation of competitors’ prices.
Markup pricing
Most commonly used pricing base by retailers.
Penetration pricing
Setting the price lower than competing brands to quickly gain market share.
Reference pricing
Pricing a product at a moderate level and positioning it next to a more expensive model or brand.
Trade discounts
Reductions off the list price given by a producer to an intermediary for performing certain functions.
Survival
Pricing objective likely utilized by Wendy’s when pricing items below cost to attract more customers.
Market share
Pricing objective utilized by Aldi’s and Dollar General to capture a large proportion of consumer spending.
Value
Perceived attribute established by Target through partnerships with suppliers to offer high-quality products at reasonable prices.
Price elasticity
Testing the sensitivity of demand by adjusting prices to maximize profitability, as done by LaTonya Horton.
Demand for gasoline
Inelastic for Mariposa Sanchez, as she consumes a significant amount regardless of the price.
Inelastic
Describes a situation where the quantity demanded does not change significantly with a change in price.
Elastic
Describes a situation where the quantity demanded changes significantly with a change in price.
Unitary
Describes a situation where the percentage change in quantity demanded is equal to the percentage change in price.
Variable
Costs that change with the level of production or sales.
Marginal costs equal marginal revenue
Situation where profits are maximized.
Demand-based pricing
Pricing strategy based on the perceived value to the customer.
Competition-based pricing
Setting prices based on competitors' pricing strategies.
Bundle pricing
Offering several products for sale as one combined product.
Comparison discounting
Pricing strategy that involves comparing prices to show a discount.
Dynamic pricing
Adjusting prices based on real-time market conditions.
Yield management
Pricing strategy to maximize resources by adapting to changes in demand.
Markup pricing
Adding a percentage to the cost to set the selling price.
Return on investment
Pricing strategy aiming for a specific return on the resources invested.
Product quality
Pricing strategy based on emphasizing the quality of the product.
Everyday low price strategy
Setting prices consistently low to attract customers.
Assessment of competitor's prices
Step in the pricing process involving analyzing competitors' pricing strategies.
Psychological pricing
Setting prices to influence consumer perception and behavior.
Flexibility
Unique characteristic of pricing in the marketing mix, allowing for adjustments based on various factors.
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