chapter 14 marketing

approx price level
demand oriented, cost oriented, profit oriented, competition oriented
demand oriented approach
considers factors underlying customer taste and preferences for setting price level
skimming pricing
Setting a high price when introducing a product that has little competition and will appeal to customers who like to be the first to have the latest products.
penetration pricing
a pricing policy whereby a firm charges a relatively low price for a product initially as a way to reach the mass market
prestige pricing
charging a high price to help promote a high-quality image
Price lining
the practice of offering a product line with several items at specific price points
odd even pricing
Psychological pricing technique based on the principle that prices ending in odd numbers ($5.99) communicate a bargain and prices ending in even numbers ($6.00) communicate quality.
Target pricing
pricing goods according to what the customer is willing to pay
bundle pricing
the marketing of two or more products in a single package price
yield management pricing
The charging of different prices to maximize revenue for a set amount of capacity at any given time.
Cost oriented approaches
standard markup pricing, cost-plus pricing, experience curve pricing
Standard markup pricing
adding a fixed percentage to the cost of all items in a specific product class
Cost plus pricing
pricing products by calculating all costs and expenses and adding desired profit
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 each time a firm’s experience at producing and selling them doubles, resulting in possible rapid price reductions
Profit oriented pricing
1. Target Profit Pricing
2. Target Return on Sales Pricing
3. Target Return on Investment Pricing
Target profit pricing
Setting an annual target of a specific dollar volume of profit
target return on sales pricing
Setting a price to acheive a profit that is a specified percentage of sales volume
target return on investment pricing
is a method of setting prices to achieve this target
competition oriented pricing
1. Customary Pricing
2. Above-, At-, or Below-Market Pricing
3. Loss-Leader Pricing
Customary pricing
setting a price that is dictated by tradition, a standardized channel of distribution, or other competitive factors
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 as the benchmark
loss leader pricing
deliberately selling a product below its customary price not to increase sales but to attract customers attention in hopes that they will buy other products as well
one price policy
offering the same price to all customers who purchase products under essentially the same conditions and in the same quantities
flexible price policy
offering the same product and quantities to different customers at different prices
product line pricing
setting prices for an entire line of products. not just earning profit on one product but the product line as a whole
price war
intense competition in which competitors cut retail prices to gain business
special adjustments to list or quoted price
discounts allowances and geographical adjustments
noncumulative quantity discounts
Reductions in price when a customer purchases a larger quantity on an individual order
cumulative discounts
apply to purchases over a given period-such as a year-and the discount usually increases as the amount purchased increases; encourage repeat buying by reducing the customer’s cost for additional purchases
seasonal discounts
discounts offered to encourage buyers to buy earlier than present demand requires
functional discounts
When seller discounts price based on buyer channel position, size, or market position.
cash discounts
reductions in price to encourage buyers to pay their bills quickly
Allowances
Like discounts, are given to final consumers, customers, or channel members for doing something or accepting less of something.
trade in allowances
a price reduction given for used products when similar new products are bought
promotional allowances
cash payments or extra amount of “free goods” awarded sellers in the channel of distribution for undertaking certain advertising or selling activities to promote a product
everyday low pricing
setting a low list price rather than relying on frequent sales, discounts, or allowances
fob origin pricing
A price tactic that requires the buyer to absorb the freight costs from the shipping point (“free on board”)
uniform delivered pricing
a price tactic in which the seller pays the actual freight charges and bills every purchaser an identical, flat freight charge
single zone pricing
all buyers pay the same delivered price for the products regardless of their distance to the seller
multiple zone pricing
A firm divides its selling territory into geographic areas or zones. Each zone has a different price depending on transportation cost.
uniform delivered pricing
a price tactic in which the seller pays the actual freight charges and bills every purchaser an identical, flat freight charge
FOB with freight allowed pricing
seller agrees to absorb transportation costs.
freight absorption pricing
a price tactic in which the seller pays all or part of the actual freight charges and does not pass them on to the buyer
basing point pricing
a price tactic that charges freight from a given (basing) point, regardless of the city from which the goods are shipped
price fixing
an agreement among firms to charge one price for the same good
horizontal price fixing
involves agreements between retailers that are in direct competition with each other to set the same prices.
vertical price fixing
attempts by manufacturers to control the ultimate retail price for their products. an agreement between a seller and a buyer(for example, between a manufacturer and a retailer) to fix the resale price at which the buyer will sell goods.
resale price maintenance
price fixing imposed by a manufacturer on wholesale or retail resellers of its products to deter price-based competition
rule of reason
under the Sherman Act, contracts or conspiracies are illegal only if they constitute an unreasonable restraint of trade or attempt to monopolize. If an agreement promotes competition, it may be legal. If it suppresses or destroys competition, it is unreasonable and illegal.
price discrimination
the business practice of selling the same good at different prices to different customers
deceptive pricing
occurs when a seller states prices or price savings that mislead consumers OR are not actually available to consumers
geographical pricing
a pricing technique that makes price adjustments because of the location of the customer for delivery of products.
predatory pricing
selling a product below cost to drive competitors out of the market