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Sensitivity of customers to price changes in terms of the quantities bought: (p. 466)
Price Elasticity of Demand
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Agreement among manufacturers, among wholesalers, or among retailers to set certain prices. This is illegal, regardless of how "reasonable"prices may be. (p. 468)
Horizontal Price Fixing
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Occurs when manufacturers or wholesalers seek to control the retail prices of their goods and services. (p. 468)
Vertical Price Fixing
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Bars manufacturers and wholesalers from discriminating in price or purchase terms in selling to individual retailers if these retailers are purchasing products of "like quality"and the effect of such discrimination is to injure competition. (p. 469)
Robinson-Patman Act
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State regulations preventing retailers from selling certain items for less than their cost plus a fixed percentage to cover overhead. These laws restrict loss leaders and predatory pricing. (p. 470)
Minimum Price Laws
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Involves large retailers that seek to reduce competition by selling goods and services at very low prices, thus causing small retailers to go out of business. (p. 470)
Predatory Pricing
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Items priced below cost to lure more customer traffic. Loss leaders are restricted by some state minimum price laws. (p. 470)
Loss Leaders
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Practice required by many states, whereby retailers (mostly food stores) must express both the total price of an item and its price per unit of measure. (p. 470)
Unit Pricing
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Practice whereby prices are marked only on shelves or signs and not on individual items. It is banned in several states and local communities. (p. 470)
Item Price Removal
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Illegal practice in which a retailer lures a customer by advertising goods and services at exceptionally low prices and then tries to convince the person to buy a better, more expensive substitute that is available. The retailer has no intention of selling the advertised item. (p. 471)
Bait-and-Switch Advertising
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Brand-name products bought in foreign markets or goods transshipped from other retailers. They are often sold at low prices by unauthorized dealers. (p. 471)
Gray Market Goods
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Strategy in which a retailer seeks to achieve large revenues by setting low prices and selling a high unit volume. (p. 473)
Market Penetration Pricing
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Strategy wherein a firm charges premium prices and attracts customers less concerned with price than service, assortment, and status. (p. 473)
Market Skimming Pricing
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Approach by which a retailer sets prices based on consumer desires. It determines the range of prices acceptable to the target market. (p. 476)
Demand-Oriented Pricing
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Approach in which a retailer sets a price floor, the minimum price acceptable to the firm so it can reach a specified profit goal. A retailer usually computes merchandise and retail operating costs and adds a profit margin to these figures. (p. 476)
Cost-Oriented Pricing
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Approach in which a firm sets prices in accordance with competitors'. (p. 476)
Competition-Oriented Pricing
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Concept stating that many consumers feel high prices connote high quality and low prices connote low quality. (p. 476)
Price–Quality Association
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Assumes consumers will not buy goods and services at prices deemed too low. It is based on the price-quality association. (p. 476)
Prestige Pricing
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Form of cost-oriented pricing in which a retailer sets prices by adding per-unit merchandise costs, retail operating expenses, and desired profit. (p. 476)
Markup Pricing
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Difference between merchandise costs and retail selling price. (p. 476)
Markup
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Difference between retail price and merchandise cost expressed as a percentage of merchandise cost: (p. 476)
Markup Percentage (at Cost)
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Difference between retail price and merchandise cost expressed as a percentage of retail price: (p. 476)
Markup Percentage (at Retail)
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Based on the original retail value assigned to merchandise less the merchandise costs, expressed as a percentage of the original retail price: (p. 478)
Initial Markup (at Retail)
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Based on the actual prices received for merchandise sold during a time period less merchandise cost, expressed as a percentage: (p. 478)
Maintained Markup (at Retail)
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Difference between net sales and the total cost of goods sold. It is also called gross profit. (p. 478)
Gross Margin
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Strategy whereby a firm purposely adjusts markups by merchandise category. (p. 479)
Variable Markup Policy
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Method for planning variable markups whereby a retailer finds the profitability of each category or unit of merchandise by computing adjusted per-unit gross margin and assigning direct product costs for such expenses as warehousing, transportation, handling, and selling. (p. 479)
Direct Product Profitability (DPP)
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Used when a retailer sets prices for goods and services and seeks to maintain them for an extended period. (p. 481)
Customary Pricing
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Version of customary pricing whereby a retailer strives to sell its goods and services at consistently low prices throughout the selling season. (p. 481)
Everyday Low Pricing (EDLP)
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Strategy wherein a retailer alters prices to coincide with fluctuations in costs or consumer demand. (p. 482)
Variable Pricing
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Computerized, demand-based, variable pricing technique whereby a retailer (typically a service firm) determines the combination of prices that yield the greatest total revenues for a given period. (p. 483)
Yield Management Pricing
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Strategy wherein a retailer charges the same price to all customers buying an item under similar conditions. (p. 483)
One-Price Policy
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Strategy that lets consumers bargain over selling prices; those consumers who are good at bargaining obtain lower prices than those who are not. (p. 483)
Flexible Pricing
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Arrangement by which a service retailer does not get paid until after the service is satisfactorily performed. This is a special form of flexible pricing. (p. 483)
Contingency Pricing
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Retail prices set at levels below even dollar values, such as $0.49, $4.98, and $199. (p. 484)
Odd Pricing
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Occurs when a retailer advertises and sells selected items in its goods/service assortment at less than the usual profit margins. The goal is to increase customer traffic so as to sell regularly priced goods and services in addition to the specially priced items. (p. 484)
Leader Pricing
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Discounts offered to customers who buy in quantity or who buy a product bundle. (p. 484)
Multiple-Unit Pricing
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Involves a retailer combining several elements in one basic price. (p. 485)
Bundled Pricing
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Involves a retailer's charging separate prices for each item sold. (p. 485)
Unbundled Pricing
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Practice whereby retailers sell merchandise at a limited range of price points, with each point representing a distinct level of quality. (p. 485)
Price Lining
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Reduction from the original retail price of an item to meet the lower price of another retailer, adapt to inventory overstocking, clear out shopworn merchandise, reduce assortments of odds and ends, and increase customer traffic. (p. 485)
Markdown
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Increase in a retail price above the original markup when demand is unexpectedly high or costs are rising. (p. 485)
Additional Markup
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Total dollar markdown as a percentage of net sales (in dollars): (p. 485)
Markdown Percentage
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Markdown for each item or category of items computed as a percentage of original retail price: (p. 486)
Off-Retail Markdown Percentage
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Looks at total dollar additional markups as a percentage of net sales: (p. 486)
Additional Markup Percentage
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Measures a price rise as a percentage of the original price: (p. 486)
Addition to Retail Percentage
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