Chapter 14 Final

Question 1

what are the four approaches for selecting an appropriate price level?

Answer 1

1. demand oriented approaches
2. cost oriented approaches
3. profit oriented approaches
4. competition oriented approaches

Question 2

what is price skimming?

Answer 2

setting the highest price that customers who really want the product are willing to pay for it

Question 3

what is penetration pricing?

Answer 3

setting a low initial price on new product to appeal to mass market

Question 4

what is prestige pricing?

Answer 4

setting a high price for quality/status conscious people will buy

Question 5

what is price lining?

Answer 5

setting the price of a line of products at different numbers (ex: the pro is $4 but pro max is $6)

Question 6

what is odd even pricing?

Answer 6

setting prices with odd numbers instead of even numbers. $99.99 instead of $100

Question 7

what is the target pricing formula?

Answer 7

estimated selling price - profit margin = target cost

Question 8

what is bundle pricing?

Answer 8

marketing two or more products together for a single price (ex: meal combos)

Question 9

what is yield management pricing?

Answer 9

when a company charges different prices to maximize revenue for a set amount of capacity. (ex: airlines charge different prices per seat)

Question 10

what is standard makeup pricing?

Answer 10

when a company adds a fixed percentage to the cost of all items in a specific category

Question 11

what is cost plus pricing?

Answer 11

deciding how much to sell something by figuring out how much it costs to make or buy, and then adding more to the product’s cost

Question 12

what is experience curve pricing?

Answer 12

when a company gets better at making and selling a product, the cost of each unit as they go on goes down

Question 13

what is target profit pricing?

Answer 13

setting annual profit target

Question 14

what is target return on sales pricing?

Answer 14

setting a price to get a profit that is a percentage of sales volumes

Question 15

target return on investment pricing?

Answer 15

setting a price to achieve an annual ROI

Question 16

what is customary pricing?

Answer 16

Where you set a price that is decided by competition

Question 17

what is above-at-or below market pricing?

Answer 17

when a company bases their prices off of competitors pricing. either they go above, at, or below their competitors

Question 18

what is loss leadership pricing?

Answer 18

when a company purposefully prices a product below how much it cost the company to make, hoping that customers will buy other products along with the first

Question 19

what is the 5th step in setting a price?

Answer 19

set the list or quoted price

Question 20

what is fixed price policy?

Answer 20

when a company sets one price for all buyers

Question 21

what is dynamic pricing strategy?

Answer 21

when a company sets different prices for products in response to supply and demand conditions

Question 22

what is the 6th step in setting a price?

Answer 22

make special adjustments to the list or quoted price discounts

Question 23

what are quantity discounts?

Answer 23

the reduction in unit costs for a larger bulk order

Question 24

what are the two types of trade in allowances?

Answer 24

1. promotional allowances
2. everyday low pricing

Question 25

what are promotional allowances?

Answer 25

when a company gives extra money or free product to sellers in the distribution chain when they help sell a product

Question 26

what is everyday low pricing?

Answer 26

when a company replaces promotional allowance with lower manufacturer list prices