Chapter 11 Flashcards
What is market-skimming pricing?
Setting a high price for a new product to skim maximum revenues layer by layer from the segments willing to pay the high price; the company makes fewer but more profitable sales i.e. Apple iPhones
What is market-penetration pricing?
Setting a low price for a new product in order to attract a large number of buyers and a large market share i.e. Wavestorm surfboard
What are five options for product mix pricing?
- Product line pricing: Setting prices across an entire product line i.e. Quicken starter, deluxe, etc.
- Optional-product pricing: Pricing optional or accessory products sold with the main product i.e. fridge ice maker
- Captive-product pricing: Pricing products that must be used with the main product i.e. Amazon kindle
- By-product pricing: Pricing low-value by-products to get rid of or make money onthem i.e. brine
- Product bundle pricing: Pricing bundles of products sold together i.e. Microsoft Office
What are the seven price adjustment strategies used to account for various customer differences and changing situations?
1) discount and allowance pricing,
2) segmented pricing,
3) psychological pricing,
4) promotional pricing,
5) geographical pricing,
6) dynamic pricing, and
7) international pricing.
What is allowance pricing?
Promotional money paid by manufacturers to retailers in return for an agreement to feature the manufacturer’s products in some way i.e. trade-in allowances
What is segmented pricing?
Selling a product or service at two or more prices, where the difference in prices is not based on differences in costs i.e. museum pricing
What is psychological pricing?
Pricing that considers the psychology of prices and not simply the economics; the price is used to say something about the product i.e. $50 vs $500 /hr lawyer
What are reference prices?
Prices that buyers carry in their minds and refer to when they look at a given produc i.e. Williams & Sonoma $200 bread maker wasn’t selling, put it next to $400 bread maker and sells doubled
What is promotional pricing?
Temporarily pricing products below the list price, and sometimes even below cost, to increase short-run sales i.e. online flash-deals
What is FOB-origin pricing?
Pricing in which goods are placed free on board a carrier; the customer pays the freight from the factory to the destination.
What is Uniform-delivered pricing?
Pricing in which the company charges the same price plus freight to all customers, regardless of their location.
What is Zone pricing?
Pricing in which 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.
What is Basing-point pricing?
Pricing in which the seller designates some city as a basing point and charges all customers the freight cost from that city to the customer.
What is Freight-absorption pricing?
Pricing in which the seller absorbs all or part of the freight charges in order to get the desired business.
What is dynamic pricing?
Adjusting prices continually to meet the characteristics and needs of individual customers and situations.
