Chapter 13 Flashcards
Barter:
exchanging goods and services for other goods and services
Value pricing:
increasing product or service benefits while maintaining or decreasing price. (offering a large pizza for the price of medium)
Final price:
list price - incentives + extra fees
Profit equation:
Profit = Total Revenue – Total Cost,
OR
Profit = (Unit Price X Quantity Sold) – Total Cost
Managing for long-run profits:
give-up immediate profit for long-term market penetration.
6 Steps in Setting a Price:
Step 1: Identifying pricing constraints and objectives:
Step 2: Estimating demand and revenue:
Step 3: Estimating cost, volume, and profit relationships:
Step 4: Selecting an approximate price level:
Step 5: Setting the list or quoted price:
Step 6: Making special adjustments to the list or quoted price
Predatory Pricing:
Selling products at an “unreasonably low” price to put competitors out of business
Free on board (FOB) origin pricing:
buyer is responsible for picking up and unloading delivery
Uniform Delivered Pricing:
Includes all transportation costs
Legal and Regulatory Issues
Loss-leader pricing:
selling products below their customary prices to attract attention to them in the hope that customers will buy other products as well.
Skimming price:
the highest initial price that customers really desiring a product are willing to pay.
Price lining:
pricing a line of products at a number of different specific pricing points. (e.g. car models like base, automatic, turbo, platinum, etc)
Prestige pricing:
setting a high price on a product to attract quality- or status-conscious customers. (Gucci gang, apple)
Penetration pricing:
setting a low initial price on a new product to appeal immediately to the mass market.
Target return-on-sales pricing:
setting typical prices that will give a firm a profit that is a specific percentage.
