Marketing Chapter 7

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  1. Pricing
    The process a co uses to determine the amount to charge a customer for a product.
  2. Pricing Objective
    A goal that a co. wants to achieve when pricing a product.
  3. Profit-Oriented Pricing Objective
    A pricing objective that focuses on the absolute or relative return that a co. wants a product to generate.
  4. Target Return Objective
    A profit-oriented pricing objective that typically sets a specific level of profit as an objective.
  5. Sales-Oriented Pricing Objective
    A pricing objective that focuses on a specific level of unit sales or dollar sales that a co. wants a product to generate.
  6. Competition-Oriented Pricing Objective
    A pricing obj. related to maintaining or increasing a particular level of market share.
  7. Market Share
    The ratio of a co's sales of a product w/in a specified market at a given point in time to the total industry sales for that type of product in that same market.
  8. Status-Quo Pricing
    A behavior a co exhibits when it sets its prices for products at the general level its competitors establish. AKA meeting the competition.
  9. Nonprice Competition
    A type of competition that exists when co's attempt to gain customers by using marketing mix factors other than price.
  10. Direct Cost
    A cost that is specifically traceable to or caused by a particular product.
  11. Indirect Cost
    A cost that is not directly traceable to any single product.
  12. Fixed Cost
    A cost that remains constant regardless of the amount or volume of a product sold over some determined time period.
  13. Variable Cost
    A cost that varies directly with changes in the amount or volume of a product sold.
  14. Price Consciousness
    A measure of the importance a specific customer attaches to price and the customer's overall awareness of price.
  15. Purchasing Power
    A measure of a customers ability to buy. AKA buying power.
  16. Demand
    The number of units of a product that a co. can sell under given conditions.
  17. Law of Demand
    In economic theory, a principle that states that all other factors remaining the same, as the price for a product increases, demand decreases and as the price for a product decreases, deman increases.
  18. Price Elasticity of Demand
    A microeconomic concept that measures the % change in the quantity demanded of a product relative to a % change in the products price.
  19. Elastic Demand
    A state that exists when a change in a products price results in a greater than proportional change in quantity demanded for that product.
  20. Inelestic Demand
    A state that exists when a change in a products price results in a less than proportional change in quantity demanded for that product.
  21. Surplus
    The amount of assets that a co has over and above its policy reserves and other obligations.
  22. Policy Reserves
    Liability accounts that identify the amounts of $ that an insurer estimates it needs to pay policy benefits as they come due.
  23. Pricing Strategy
    A strategy that helps define the way a co establishes prices for its products.
  24. Cost-Driven Pricing Strategy
    A pricing strategy where co. sets its prices to cover the co's costs incurred in creating, selling, and servicing a product and to allow for a predetermined level of profit. AKA cost-plus strategy.
  25. Customer driven pricing strategy
    A pricing strategy where a co. sets prices according to what customers are willing to pay for the value they receive. AKA value-based pricing strategy.
  26. Relationship Pricing
    The practice of offering price reductions to customers who purchase multiple products from a co's product mix.
  27. Psychological Pricing
    A customer-driven pricing strategy based on the belief that customers find certain types of prices or price ranges more appealing than others.
  28. Prestige Pricing
    A form of psychological pricing that involves setting intentionally high prices for a product to convey an image of high quality.
  29. Promotional Pricing
    A customer driven pricing strategy where a co sets lower-than-normal prices on certain products in an attempt to stimulate sales of all of the co's products.
  30. Price Leader
    Product with price set intentionally low to attract customers who will buy more products at regular prices.
  31. Loss Leader
    A price leader that is priced below cost.
  32. Competition-Driven Pricing Strategy
    A pricing strategy where co sets prices relative to those charged by its competitors.
  33. Penetration Pricing
    A competition driven pricing strategy where co charges a comparatively low price designed to build market share and to produce a large sales volume quickly.
  34. Flexible Pricing
    A competition driven pricing strategy where the price a co charges varies according to specific sales condtions. AKA variable pricing.
  35. Competitive Bidding
    A process where buyers ask potential suppliers to offer price quotes on a proposed contract.
  36. Negotiated Contract
    Contract with terms and prices of contract established thru talks b/t buyer & seller.
  37. Preferred Risk Discount
    A rate structure with reduced premium rates offered to PIs whose health/lifestyles indicate mortality rate lower than avg.
  38. Quantity Discount
    A rate structure, rates graded by the size of the policy.
  39. Banding
    A method of providing quantity discounts in which a co creates a number of contiguous bands based on the face amount and charges different rates for each band.
  40. Policy Fee System
    Quantity discount method, co charges flat amount per policy to cover admin expenses plus a specific rate per thousand dollars of coverage.
  41. Gender-Based Pricing
    A rate structure that has different rates for males & females.
  42. Market-by-Market pricing
    A rate structure a co uses when it charges different rates depending on the jurisdiction, geographical area, or target market in which a product is sold. AKA market-specific-pricing or channel-specific pricing.
  43. Investment Margin
    The difference b/t the investment rate the insurer assumes when pricing a product, and the the one the insurer actually earns.
  44. Underwriting Margin
    The difference b/t the benefit costs assumed in pricing, and the products actual benefit costs.
  45. Expense Margin
    The difference b/t operating expenses assumed when a product was priced, and expenses actually experienced.
Card Set
Marketing Chapter 7
Pricing Insurance Products; A Marketing Perspective
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