Chapter (11-15)

Marketing Principles

Price

The amount of something—money, time, or effort—that a buyer exchanges with a seller to obtain a product.

Revenue

The result of the price charged to customers multiplied by the number of units sold.

Profits

Revenue minus total costs.

Profit maximization

A pricing objective that involves setting a relatively high price for a period of time after the product launches.

Volume maximization

A pricing objective that involves setting prices low to encourage a greater volume of purchases; also called *penetration pricing.*

Survival Pricing

A pricing objective that involves lowering prices to the point at which revenue just covers costs, allowing the firm to endure during a difficult time.

Marginal revenue

The change in total revenue that results from selling one additional unit of product.

Marginal cost

The change in total cost that results from producing one additional unit of product

Price sensitivity

The degree to which the price of a product affects consumers’ purchasing behavior.

Price elasticity of demand

A measure of price sensitivity that gives the percentage change in quantity demanded in response to a percentage change in price (holding constant all the other determinants of demand, such as income).

Inelastic demand

Demand for which a given percentage change in price results in a smaller percentage change in quantity demanded.

Elastic demand

Demand for which a given percentage change in price results in an even larger percentage change in quantity demanded.

Variable costs

Costs that vary depending on the number of units produced or sold.

Fixed cost

Costs that remain constant and do not vary based on the number of units produced or sold.

Break-even analysis

The process of calculating the break-even point, which equals the sales volume needed to achieve a profit of zero.

Break-even point

The point at which the costs of producing a product equal the revenue made from selling the product.

Reference prices

The prices that consumers consider reasonable and fair for a product.

Underpricing

Charging someone less than they are willing to pay.

Unbundling

Separating out the individual goods, services, or ideas that make up a product and pricing each one individually.

Escalator clauses

A section in a contract that provides for price increases if certain, specified conditions occur.

Shrinkflation

The process of items shrinking in size or quantity while their prices remain the same or increase.

Markup Pricing

A pricing method in which a certain amount is added to the cost of the product, to set the final price; also called *cost-plus pricing.*

Profit margin

The amount a product sells for above the total cost of the product itself.

Odd pricing

A pricing tactic in which a firm prices products a few cents below the next dollar amount.

Even Pricing

Pricing tactic that sets prices at even dollar amounts.

Prestige pricing

A pricing tactic that involves pricing a product higher than competitors to signal that it is of higher quality.

Loss-leader pricing

A pricing tactic that involves selling a product at a price that causes the firm a financial loss.

Seasonal discounts

Price reductions given to customers purchasing goods or services out of season.

Price bundling

A pricing tactic in which two or more products are packaged together and sold at a single price.

Dynamic pricing

A pricing tactic that involves constantly updating prices to reflect changes in supply, demand, or market conditions.

Yield management

A strategy for maximizing revenue even when a firm has a fixed amount of something (goods, services, or capacity).

Name-your-own-price auction

A pricing tactic in which the consumer submits a bid at the price he or she is willing to pay for a product or service, and the auction site conducts a search to find matches with prices set by participating suppliers.

Gray market

The sale of branded products through legal but unauthorized distribution channels.

Tariffed

Taxes on imports and exports between countries.

Dumping

A protectionist strategy in which a company sells its exports to another country at a lower price than it sells the same product in its domestic market.

Price discrimination

The practice of charging different customers different prices for the same product.

Price fixing

When two or more companies collude to set a product’s price.

Predatory pricing

The practice of first setting prices low with the intention of pushing competitors out of the market or keeping new competitors from entering the market, and then raising prices to normal levels.

Deceptive pricing

An illegal practice that involves intentionally misleading customers with price promotions.

Robinson-Patman Act

A law passed in 1936 that requires sellers to charge everyone the same price for a product; also called the *Anti-Price Discrimination Act.*

Federal trade commission act

A law passed in 1914 that established the Federal Trade Commission and sought to prevent practices that may cause injury to customers, that cannot be reasonably avoided by customers, and that cannot be justified by other outcomes that may benefit the consumer or the idea of free competition.

Wheeler-Lea act

An amendment to the Federal Trade Commission Act passed in 1938 that removed the burden of proving that unfair and deceptive practices had to injure competition; also called the *Advertising Act.*

Sherman antitrust act

A law passed in 1890 to eliminate monopolies and guarantee competition.

Retailing

All of the business activities involved in the sales of goods and services to an end consumer for their personal, family, or household use.

Retailer

Any organization that sells directly to end-user consumers.

Buyer

A retail professional responsible for purchasing wholesale merchandise for retailers to sell in store or online.

Visual merchandiser

A retail professional that develops layout plans and displays aimed at improving store sales by highlighting select items using visually appealing displays.

Corporate chains

Two or more retail outlets that are commonly owned and controlled.

Retailer Cooperative

A group of independent retailers that band together to set up a jointly owned, central wholesale operation that also conducts joint merchandising and promotion.

Voluntary chain

Groups of independent retailers, sponsored by wholesalers, who band together for increased buying power.

Business format franchise

Business organization in which the franchisor provides to the franchisee not just its trade name, products, and services but an entire system for operating the business.

Product distribution franchise

Business organization in which the franchisee gains preferred or exclusive access to the products manufactured or supplied by the franchisor, but not the franchisor’s system of doing business.

Assortment

The selection of merchandise a retailer carries.

Breadth of assortment

The number of distinct goods or service product lines that a retailer carries.

Depth of assortment

The number of individual items offered within any single product line.

Scrambled merchandising

Selling goods and services that may be unrelated to each other and to the firm’s original business.

Discount stores

General merchandise outlets that offer brand-name and private-label products at low prices.

Full-line discount stores

General merchandise outlets that carry a wide assortment of merchandise across popular categories.

Supercenter format

Full-line discount store format that includes grocery, pharmacy, and services.

Specialty discount store

General merchandise outlets that offer a wide selection of merchandise within a single category.

Category killers

Specialty discount stores that are able to gain high market share within their chosen category.

Supermarkets

Merchandise outlets that carry a wide and complex line of groceries, meat, dairy, produce, and baked goods plus a limited array of nonfood products.

Warehouse clubs

Merchandise outlets that operate in warehouse-like facilities that offer merchandise in bulk quantities, at ultra-low prices, to shoppers who pay an annual fee to join; also known as *wholesale clubs* or *membership warehouses.*

Stock-keeping unit

A distinct item available for sale within a retail store or e-commerce website.

Convenience store

Small, self-service stores that are open long hours and carry a limited number of frequently purchased items.

Department stores

Merchandise outlets that carry a wide variety of product lines, with each line operated as a separate department and managed by specialist merchandisers and buyers.

Leased department

A section within a retail store that is rented to an outside party.

Specialty stores

A store that concentrates on selling one line of goods or services and carries a narrow but deep merchandise assortment.

Off-price retail store

Stores that feature brand-name (sometimes designer) merchandise bought at less-than-regular wholesale prices and sold at less-than-retail prices.

Opportunistic buying

Purchasing behavior in which off-price retail stores negotiate especially low prices for certain categories of merchandise, such as end-of-season goods and closeouts.

Extreme-value store

Stores that carry an assortment of inexpensive and popularly priced merchandise; heirs to the traditional Main Street “five-and-dime” variety stores from decades past.

Online retailing

B2C electronic commerce in which individual consumers directly buy goods or services over the Internet; also known as *e-retailing.*

Catalog marketing

A retail sales technique used to group many items together in a printed piece or an online store.

Shop-at-home television networks

A type of specialty television channel in which on-air presenters provide live demonstration and sales pitches for merchandise that viewers can buy online or by phone.

Direct selling

Retailing in which an independent representative of a company conducts retail and sales-related activities away from a fixed retail location, most often at consumers’ homes or place of business. Also known as *direct retailing.*

Isolated store

A freestanding retail outlet located on either a highway or major road.

Unplanned business district

A type of retail location where two or more stores are situated together or in close proximity.

Planned shopping center

A group of architecturally unique business establishments on a site that is centrally owned or managed.

Atmospheric

A group of architecturally unique business establishments on a site that is centrally owned or managed.

Slotting allowances

Payments made by manufacturers to retailers to ensure that products are preferentially displayed by the retailer.

Merchandising

The activities involved in acquiring particular goods and services and making them available at the places, times, prices, and quantities that enable a retailer to achieve its goals.

Category management

A merchandising technique that focuses on the performance of a product category rather than individual brands.

Micro-merchandising

A category-management technique in which a retailer adjusts its shelf-space allocations in response to overall consumer demand as well as differences in local markets.

Cross-merchandising

A category-management technique in which a retailer carries complementary goods and services to encourage shoppers to buy more.

Omnichannel retailing

The retailing practice of integrating customer experiences across the physical and online channels.

Customer journey map

A visual representation of the process a customer or prospect goes through to achieve a goal with a company.

Geofencing

A location-based technology that uses small sensors to send messages to smartphone users who enter a nearby, defined geographic area.

Gamification

The application of typical elements of game playing (e.g., point scoring, competition with others, rules of play) to other areas of activity, typically as an online marketing technique to encourage engagement with a product or service.

Augmented reality

An interactive experience of a real-world environment where the objects that reside in the real world are “augmented” by computer-generated perceptual information.

Virtual reality

An interactive, computer-generated experience that takes place within an immersive simulated environment, typically incorporating multisensory feedback.

Artificial intelligence

An area of computer science that emphasizes the creation of intelligent machines that work and react like humans.

Digital marketing

The marketing of goods or services using digital media, such as e-mail, websites, search engines, and social media platforms.

Social media

Internet-based applications that enable users to create their own content and share it with others who access these sites.

Mobile computing

Technology that allows transmission of data, voice, and video via any wireless-enabled computing device, without a fixed physical connection.

FOMO

A feeling of isolation and concern about missing out on what is occurring in the world around us.

Zero moment of truth

The moment when a customer uses a digital device to begin learning about a potential purchase.

Search marketing

A form of Internet marketing that promotes websites by increasing their visibility in search engine results pages.

Search engine

A software system designed to search for information on the World Wide Web.

Search engine optimization

Adjusting or rewriting website content and site architecture to achieve a higher ranking in search engine results pages to enhance pay per click (PPC) listings.

Search engine marketing

The process of generating website traffic by purchasing advertisements on search engines.