Chapter 13: Creating and Pricing Products that Satisfy Customers

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Ch 13

breakeven equity

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the number of units that must be sold for the total revenue from all units sold to equal the total costs of all units sold

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Ch 13

decline

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stage of the product life-cycle where sales volume decreases sharply

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Ch 13

brand recongnition

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level of brand loyalty at which customers are aware that the brand exists and will purchase it if their preferred brands are unavailable or if they are unfamiliar with available brands

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Ch 13

concept testing phase and position

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third phase of new-product development in which a product idea is presented to a small sample of potential buyers through a written or oral description to determine their attitudes and initial buying intentions regarding the product

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Ch 13

brand equity

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marketing and financial value associated with a brand’s strength in a market

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Ch 13

price differentiation

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a type of demand-based pricing used if a firm wants to use more than one price in the marketing of a specific product by isolating market segments based on different strengths of demand

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Ch 13

commercialization phase and position

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seventh and final phase of new-product development where plans for full-scale manufacturing and marketing must be refined and completed, and budgets for the project must be prepared for the products eventual introduction

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Ch 13

price lining

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the strategy of selling goods only at certain predetermined prices that reflect definite price differences; type of product-line pricing

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Ch 13

periodic discounting

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temporary reduction of prices on a patterned or systematic basis; type of differential pricing

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Ch 13

imitations

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products designed to be similar to -and to compete with- existing products of other firms

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Ch 13

cost-based pricing

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simplest method of pricing in which the cost to produce one unit is added to an amount in order to cover all other costs and profit to determine its selling price

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Ch 13

random discounting

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temporary reduction of prices on an unsystematic basis; type of differential pricing

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Ch 13

component part

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an item that becomes part of a physical product and is either a finished item ready for assembly or a product that needs little processing before assembly

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Ch 13

functional modifications

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changes that affect a product’s versatility, effectiveness, convenience, or safety; usually require redesign on the product

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Ch 13

maturity stage

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stage of the product life-cycle where sales are still increasing in the beginning but the rate of increase has slowed; eventually the sales curve peaks and begins to decline

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Ch 13

trademark

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a brand name or brand mark that is registered with the U.S. Patent and Trademark Office and this is legally protected from use by anyone except its owner

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Ch 13

product mix width

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the number of product lines it contains

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Ch 13

packaging

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all the activities involved in developing and providing a container with graphics for a product

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Ch 13

comparison discounting

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setting a price at a specific level and comparing it with a higher price; type of promotional pricing

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Ch 13

bundle pricing

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packaging together two or more complementary products and selling them for a single price

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Ch 13

multiple-unit pricing

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the strategy of setting a single price for two or more units

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Ch 13

process material

Answer 1

a material that is used directly in the production of another product but is not readily identifiable in the finished product

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Ch 13

pricing strategy

Answer 2

a course of action designed to achieve pricing objectives

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Ch 13

specialty product

Answer 3

an item that possesses one or more unique characteristics for which a significant group of buying consumers is willing to expend considerable purchasing effort

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# Ch 13 allowance

Answer 4

a reduction in price to achieve a desired goal

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# Ch 13 growth stage

Answer 6

stage of the product life-cycle where sales increase rapidly as the product becomes well-known

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# Ch 13 test marketing phase and position

Answer 7

sixth phase of new-product development where there is limited introduction of a product in several towns or cities in order to determine buyers' probable reactions

Question 7

# Ch 13 store (or private) brand

Answer 7

a brand that is owned by an individual wholesaler or retailer

Question 7

# Ch 13 express warranty

Answer 7

a written explanation of the producer's responsibilities in the event that a product is found to be defective or otherwise unsatisfactory

Question 7

# Ch 13 raw material

Answer 7

a basic material that actually becomes part of a physical product; usually comes from mines, forests, oceans, or recycled solid wastes

Question 8

# Ch 13 reference pricing

Answer 8

pricing a product at a moderate level and positioning it next to a more expensive model or brand

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# Ch 13 product line

Answer 9

a group of similar products that differ only in relatively minor characteristics

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# Ch 13 FOB destination pricing

Answer 12

price includes freight charges

Question 12

# Ch 13 geographic pricing strategies

Answer 12

business product pricing that deals with delivery costs

Question 13

# Ch 13 product

Answer 13

everything one receives in an exchange, including all tangible and intangible attributes and expected benefits; it may be a good, a service, or an idea

Question 14

# Ch 13 odd-number pricing

Answer 14

the strategy of setting prices using odd numbers that are slightly below whole-dollar amounts

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# Ch 13 business analysis phase and position

Answer 15

fourth phase of new-product development that considers how the new product would affect the firm's sales, costs, and profits

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# Ch 13 special-event pricing

Answer 16

advertised sales or price cutting linked to a holiday, season, or event; type of promotional pricing

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# Ch 13 product life-cycle

Answer 17

a series of stages in which a product's sales revenue and profit increase, reach a peak, and then decline

Question 19

# Ch 13 individual branding

Answer 19

the strategy in which a firm uses a different brand for each of its products

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# Ch 13 everyday low prices (EDLPs)

Answer 20

setting a low price for products on a consistent basis

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# Ch 13 total cost

Answer 21

the sum of the fixed costs and the variable costs attributed to a product

Question 22

# Ch 13 manufacturer (or producer) brand

Answer 22

a brand that is owned by a manufacturer

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# Ch 13 variable cost

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a cost that depends on the number of units produced

Question 26

# Ch 13 psychological pricing (6 types)

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strategies that encourage purchases based on emotional responses rather than on economically rational responses types- odd-number pricing, multiple-unit pricing, reference pricing, bundle pricing, everyday low prices (EDLPs), customary pricing

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# Ch 13 price leaders

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products priced below the usual markup, near cost, or below cost; type of promotional pricing

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# Ch 13 aesthetic modifications

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changes directed at the sensory appeal of a product by altering its taste, texture, sound, smell, or visual characteristics

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# Ch 13 screening phase and position

Answer 30

second phase of new-product development where ideas that don't match organization resources and objectives are rejected

Question 30

# Ch 13 product mix depth

Answer 30

the average number of individual products within each line

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# Ch 13 business service

Answer 32

an intangible product that an organization uses in its operations

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# Ch 13 demand-based pricing

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method of pricing where there is a high price when product demand is strong and low price when weak

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# Ch 13 business product (aka business-to-business product or industrial product)

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a product bought for resale, for making other products, or for use in a firm's operations

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# Ch 13 penetration pricing

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the strategy of setting a low price for a new product

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# Ch 13 brand extension

Answer 37

using an existing brand to brand a new product in a different product category

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# Ch 13 shopping product

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an item for which buying consumers are willing to expend considerable effort on planning and making the purchase

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# Ch 13 trade name

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the complete and legal name of the organization

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# Ch 13 brand

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a name, term, symbol, design, or any combination of these that identifies a seller's products as distinct from those of other sellers

Question 41

# Ch 13 brand mark

Answer 41

the part of a brand that is a symbol or distinctive design

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# Ch 13 consumer product

Answer 42

a product purchased to satisfy personal and family needs

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# Ch 13 quantity discounts

Answer 43

discounts given to customers who buy in large quantities

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# Ch 13 quality modifications

Answer 44

changes that relate to a product's dependability and durability and are usually achieved by alterations in the materials or production process

Question 45

# Ch 13 brand preference

Answer 45

level of brand loyalty at which customers prefer one brand over competing brands, but will buy a competing brand if theirs is unavailable

Question 46

# Ch 13 customary pricing

Answer 46

pricing on the basis of tradition

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# Ch 13 discount

Answer 47

a deduction from the price of an item

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# Ch 13 cash discounts

Answer 48

discounts offered for prompt payment

Question 50

# Ch 13 fixed cost

Answer 50

a cost incurred no matter how many units of a product are sold or produced

Question 50

# Ch 13 trade discounts

Answer 50

discounts from list prices that are offered to marketing intermediaries (middlemen)

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# Ch 13 transfer pricing

Answer 53

prices charged in sales between an organization's units

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# Ch 13 FOB origin pricing

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stands for "free on board at the point of origin"; price does not include freight charges

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# Ch 13 price floor

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the minimum price at which a firm can sell its products without incurring a loss

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# Ch 13 product deletion

Answer 58

the elimination of one or more products from a product line

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# Ch 13 generic product (or brand)

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a product with no brand at all

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# Ch 13 line extension

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development of a new product that is closely related to one or more products in the existing product line but designed specifically to meet somewhat different customer needs such as a new flavor or sizes

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# Ch 13 differential pricing (four types)

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charging different prices to different buyers for the same quality and quantity of product types- negotiated pricing, secondary-market pricing, periodic discounting, and random discounting

Question 63

# Ch 13 idea generation phase and position

Answer 63

first phase of new-product development that involves looking for product ideas that will help a firm achieve its objectives

Question 64

# Ch 13 brand name

Answer 64

the part of a brand that can be spoken

Question 66

# Ch 13 family branding

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the strategy in which a firm uses the same brand for all or most of its products

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# Ch 13 price skimming

Answer 67

the strategy of charging the highest possible price for a product during the introduction stage of its life-cycle

Question 68

# Ch 13 total revenue

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the total amount received from sales of a product

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# Ch 13 markup

Answer 69

the amount a seller adds to the cost of a product to determine its basic selling price

Question 71

# Ch 13 brand loyalty

Answer 71

extent to which a customer is favorable toward buying a specific brand

Question 74

# Ch 13 major equipment

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large tools and machines used for production purposes

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# Ch 13 supply

Answer 75

an item that facilitates production and operations but does not become part of a finished product

Question 78

# Ch 13 price competition

Answer 78

an emphasis on setting a price equal to or lower than competitors' prices to gain sales or market share

Question 79

# Ch 13 discounts offered for prompt payment

Answer 79

cash discounts

Question 82

# Ch 13 product mix

Answer 82

all the products a firm offers for sale

Question 84

# Ch 13 price

Answer 84

the amount of money a seller is willing to accept in exchange for a product at a given time and under given circumstances

Question 86

# Ch 13 competition-based pricing

Answer 86

a type of pricing where costs and revenue are secondary to competitors' prices

Question 87

# Ch 13 adaptations

Answer 87

variations of existing products that are intended for an establish market

Question 88

# Ch 13 innovations

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entirely new products that may give rise to a new industry or revolutionize an existing one

Question 89

# Ch 13 labeling

Answer 89

the presentation of information on a product or its package

Question 90

# Ch 13 product development phase and position

Answer 90

fifth phase of new-product development in which the company finds out if it is technically feasible to produce the product and then if the product can be made at costs low enough to justify a reasonable price; idea is transformed into a protype

Question 91

# Ch 13 premium pricing

Answer 91

pricing the highest-quality or most-versatile products higher than other models in the product line; type of product-line pricing

Question 92

# Ch 13 product differentiation

Answer 92

the process of developing and promoting differences between one's product and all similar products

Question 93

# Ch 13 seasonal discounts

Answer 93

price reduction to buyers who purchase out of season

Question 94

# Ch 13 negotiated pricing

Answer 94

establishing a final price through bargaining; type of differential pricing

Question 96

# Ch 13 product modification

Answer 96

the process of changing one or more of a product's characteristics

Question 97

# Ch 13 secondary-market pricing

Answer 97

setting one price for the primary target market and and a different price for another market; type of differential pricing

Question 99

# Ch 13 brand insistence

Answer 99

strongest, but least common, level of brand loyalty in which customers strongly prefer one brand and will not not buy substitutes

Question 100

# Ch 13 convenience product

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a relatively inexpensive, frequently purchased item for which buyers want to exert only minimal effort

Question 101

# Ch 13 captive pricing

Answer 101

pricing the basic product in a product line low, but pricing related items at a higher level; type of product-line pricing

Question 102

# Ch 13 non-price competition

Answer 102

competition based on factors other than price

Question 103

# Ch 13 product-line pricing (3 types)

Answer 103

establishing and adjusting the prices of multiple products within a product line; types are captive pricing, premium pricing, and price lining

Question 104

# Ch 13 introduction stage

Answer 104

stage of the product life-cycle where customer awareness and acceptance of the product are low

Question 105

# Ch 13 promotional pricing (3 types)

Answer 105

Pricing that is promotion orientated; types are price leaders, special-event pricing, and comparison discounting

Question 106

# Ch 13 Top five pricing objectives

Answer 106

Survival, profit maximization, target return on investment, market-share goals, status-quo pricing