Chapter 9: Pricing Flashcards
The amount charged for a product or service, or the sum of the values that customers exchange for the benefits of having or using the product or service
Price
Setting price based on buyers perceptions of value rather than on the sellers cost
Customer value-based pricing
Offering just the right combination of quality and good service at a fair price
Good-value pricing
Attaching value-added features and services to differentiate a company’s offers and charging higher prices
Value-added pricing
Setting prices based on the costs of producing, distributing, and selling the product plus a fair rate of return for effort and risk
Cost-based pricing
Costs that do not vary with production or sales levels
Fixed costs (overhead)
Costs that vary directly with the level of production
Variable costs
The sum of the fixed and variable costs for any given level of production
Total costs
Adding a standard markup to the cost of the product
Cost-plus pricing (markup pricing)
Setting price to break even on the costs of making and marketing a product or setting price to make a target return
Break-even pricing (target return pricing)
Setting prices based on competitors strategies, prices, costs, and market offerings
Competition-based pricing
Pricing that starts with an ideal selling price, then targets costs that will ensure that the price is met
Target costing
A curve that shows the number of units the market will buy in a given time period at different prices that might be charged
Demand curve
A measure of the sensitivity of demand to changes in price
Price elasticity
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. The company makes fewer but more profitable sales
Market-skimming pricing (price skimming)
Setting a low price for a new product in order to attract a large number of buyers and a large market share
Market-penetration pricing
Setting the price steps between various products in a product line based on cost differences between the products, customer evaluation of different features, and competitors’ prices
Product line pricing
The pricing of optional or accessory products along with a main product
Optional-product pricing
Setting a price for products that must be used along with a main product, such as blades for a razor and games for a video-game console
Captive-product pricing
Setting a price for by-products in order to make the main product’s price more competitive
By-product pricing
Combining several products and offering the bundle at a reduced price
Product bundle pricing
A straight reduction in price on purchases during a stated period of time or of larger quantities
Discount
Promotional money paid by manufacturers to retailers in return for an agreement to feature the manufacturer’s product in some way
Allowance
Selling a product or service at two or more prices, where the difference in prices is not based on differences in costs
Segmented pricing
