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Marketing > Pricing Terminology (10) > Flashcards

Pricing Terminology (10) Flashcards

1
Q

a _______ is what is being charged or exchanged for a product or service

A

price

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2
Q

What is price?

A

what is being charged or exchanged for a product or service

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3
Q

What is value?

A

What a product or service is worth to a consumer, or the maximum amount a consumer would pay

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4
Q

Value is what a product or service is ______ to a consumer

A

worth

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5
Q

Price is what is being ______ or exchanged for a product or service

A

charged

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6
Q

What are fixed costs?

A

costs associated with the operating and marketing expenses of a company

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7
Q

Fixed costs are costs associated with…

A

the operating and marketing expenses of a company

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8
Q

Fixed costs are the costs associated with the _______ and _______ expenses of a company

A

operating, marketing

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9
Q

Do fixed costs change with the number of products sold?

A

No

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10
Q

an example of this type of cost is the cost of renting a warehouse to store product

A

fixed costs

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11
Q

Fixed costs ____ ____ over the number of units sold

A

spread out

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12
Q

What are variable costs?

A

the per-unit costs associated with the product.

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13
Q

the per-unit costs associated with the product are called…

A

variable costs

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14
Q

what is an example of variable costs?

A

the cost of material to make the product. If it costs $1 in material to make a widget, then it costs the company $1 in variable costs each time it produces a widget.

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15
Q

the breakeven point for a product is…

A

the point at which revenues equal expenses

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16
Q

what is a breakeven quantity?

A

A breakeven quantity is the quantity the company needs to sell at a certain price in order to cover fixed costs.

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17
Q

A breakeven quantity is the quantity the company needs to ______ at a certain price in order to cover ______ costs.

A

sell, fixed

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18
Q

Thr breakeven price is the amount…

A

the amount a marketer needs to price a product in order to cover expenses at a certain quantity sold.

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19
Q

The amount a marketer needs to price a product in order to cover expenses at a certain quantitiy sold is called…

A

breakeven price

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20
Q
A
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21
Q

the quantity the company needs to sell at a certain price in order to cover fixed costs is called…

A

breakeven quantity

22
Q

What is the first step to developing a pricing structure?

A

how there particular industry behaves with prices

23
Q

What are the two general types of industries for pricing?

A

dumb industry

price industry

24
Q

What happens in a dumb industry?

A

companies tend to compete for price

25
Q

In a dumb industry companies…

A

tend to compete for price

26
Q

What is a company’s main strategy for winning customers in a dumb industry?

A

its main differentiator is to simply have the lowest price.

27
Q

Competition for the lowest priced product is called…

A

price wars

28
Q

what is a “price sensitive” customer greatly influecned by?

A

the price of the product

29
Q

In which price market do you find price senstive buyers?

A

dumb

30
Q

Dumb markets lead to…

A

price sensitive customers and price wars

31
Q

price sensitivity means that…

A

purchases are greatly influenced by the price of the product

32
Q

What happens in a smart industry?

A

In a smart industry, companies tend to use more complex pricing structures and use more pricing options.

33
Q

Is there less or more head-to head competition with price in a smart market?

A

less

34
Q

Customers buying in a smart market are usually _____ price sensitive

A

less

35
Q

What is price elasticity?

A

the change in demand in a market in response to a product’s change in price.

36
Q

the change in demand in a market in response to a product’s change in price is called…

A

price elasticity

37
Q

Price elasticity is the change in ______ in a market in response to a product’s change in _____.

A

demand, price

38
Q

A market is considered elastic if….

A

a change in price produces a substantial change in demand.

39
Q

a market is inelastic if…

A

a change in prices results in little to no change in demand.

40
Q

When a change in prices results in little to no change in demand this is called…

A

an inelastic market

41
Q

whan a market is inelastic a change in _____ results in ____ change in demand.

A

little

42
Q

when a market is elastic a change in prices results in ______ change in demand.

A

substantial

43
Q

Fill in the blanks

A
  1. inelastic 2. elastic 3. inelastic 4. elastic
44
Q

How is price elasticity calculated?

A

% of change in quantity sold / % change in price

45
Q

A price elasticity calculation of < -1 is considered ______

A

elastic

For example, let’s say the price of a widget is $5, and the marketer increases the price by 20% to $6. As a result, the quantity sold (demand) falls from 100 units to 50 units, or the quantity changes by -50%.

The calculation for this is: -50% / 20%

PE = -2.5

This amount is LESS THAN -1. Therefore, the price is elastic.

46
Q

A price elasticity calculation of > -1 is considered ______

A

elastic

47
Q

if a marketer sells a product in a market that is price inelastic, then…

A

the marketer can adjust the price upward without it affecting demand as much.

If prices increase and demand stays the same, this means the overall profits will increase. However, a marketer cannot increase prices infinitely without it eventually having a negative impact on the company.

48
Q

if prices increase and demand stays the same, this means the overall profits will _____.

A

increase

However, a marketer cannot increase prices infinitely without it eventually having a negative impact on the company.

49
Q

if a marketer sells a product in a market that is price elastic, then…

A

price increases will result in a significant decrease in demand, decreasing overall profits.

50
Q

what is an industry example of an inelastic market?

A

cigarette sales

price elasticity in cigarette sales has been found to be between -.3 and -.6 overall. That is considered to be an inelastic price elasticity for demand, meaning that as cigarette prices increase, demand does not decrease very much.

51
Q

what is an industry example of an elastic market?

A

leisure airline travel

leisure airline travel in the US has a price elasticity of approximately -1.5, which is elastic. This means that as airline ticket prices increase, demand for plane tickets for leisure travel decreases.

Marketing (55 decks)

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