Marketing Chp 20

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  1. 4 Steps to Setting a Price
    • establish pricing goals
    • estimate demand, costs & profits
    • choose a price strategy to help determine a base price
    • fine-tune the base price with pricing tactics
  2. Price Strategy
    a basic, long-term pricing framework that establishes the initial price for a product and the intended direction for price movements over the product life cycle
  3. Price Skimming
    • a pricing policy whereby a firm charges a high introductory price, often coupled with heavy promotion
    • sometimes called a "market-plus" approach
  4. Penetration Pricing
    • a pricing policy whereby a firm changes a relatively low price for a product initially as a way to reach the mass market
    • means lower profit/unit
    • typically discourages or blocks competition from entering a market
  5. Status Quo Pricing
    • charing a price identical to or very close to a competition's price
    • advantage: simplicity
    • disadvantage: may ignore demand or cost or both
  6. Unfair Trade Practice Acts
    • laws that prohibit wholesalers and retailers from selling below cost
    • intent is to protect small local firms from giants like WalMart
  7. Price Fixing
    • an agreement between two or more firms on the price they will charge for a product
    • illegal under the Sherman Act & FTC Act
  8. Price Discrimination
    • Robinson-Patman Act of 1936
    • prohibits any firm from selling to 2 or more different buyers, within a reasonably short time, commodities (not services) of like grade and quality at different prices
  9. Predatory Pricing
    the practice of charging a very low price for a product with the intent of driving competitors out of business or out of a market
  10. Base Price
    the general price level at which the company expects to sell teh good or service
  11. Quantity Discount
    a price reduction offered to buyers buying in multiple units or above a specified dollar amount
  12. Cumulative Quantity Discount
    • a deduction from list price that applies to the buyer's total purchases made during a specific period
    • intended to encourage customer loyalty
  13. Noncumulative Quantity Discount
    • a deduction from list price that applies to a single order rather than to the total volume of orders placed during a certain period
    • intended to encourage orders in large quanities
  14. Cash Discount
    a price reduction offered to a consumer, an industrial user, or a marketing intermediary in return for prompt payment of a bill
  15. Functional (Trade) Discount
    a discount to wholesalers and retailers for performing channel functions
  16. Seasonal Discount
    a price reduction for buying merchandise out of season
  17. Promotional (Trade) Allowance
    • a payment to a dealer for promoting the manufacturer's products
    • both a pricing tool & promotional device
  18. Rebate
    cash refund given for the purchase of a product during a specific period
  19. Value-based Pricing (Value Pricing)
    settling the price at a level that seems to the customer to be a good price compared to the prices of other options
  20. FOB Origin Pricing
    a price tactic that requires the buyer to absorb the freight costs from the shipping point.
  21. Uniform Delivered Pricing
    • a price tactic in which teh seller pays the actual freight charges and bills every purchaser an identical, flat freight charge
    • aka "postage stamp" pricing
  22. Zone Pricing
    • a modification of uniform delivered pricing that divides the US (or the total market) into segments or zones and charges a flat freight rate to all customers in a given zone
    • best known is USPS parcel post rate structure
  23. Freight Absorption Pricing
    • a price tactic in which the seller pays all or part of the actual freight charges and does not pass them on to the buyer
    • a way to break into new market areas
  24. Basing-point Pricing
    a price tactic that charges freight from a given (basing) point, regardless of the city from which the goods are shipped
  25. Phantom Freight
    freight fees charged when none were actually incurred; declared illegal
  26. Single-Price Tactic
    a price tactic that offers all g/s at the same price (or perhaps 2 or 3 prices)
  27. Flexible (Variable) Pricing
    a price tactic in which different customers pay different prices for essentially the same merchandise bought in equal quantities
  28. Price Lining
    the practice of offering a product line with several items at specific price points
  29. Leader (Loss-leader) Pricing
    a price tactic in which a product is sold near or even below cost in the hope that shoppers will buy other items once they are in the store
  30. Bait Pricing
    a price tactic that tries to et consumers into a store through false or misleading price advertising and then uses high-pressure selling to persuade consumers to buy more expensive merchandise
  31. Odd-Even Pricing (aka Psychological Pricing)
    a price tactic that uses odd-numbered prices to connote bargains and even-numbered price to imply quality
  32. Price Bundling
    marketing two or more products in a single package for a special price
  33. Unbundling
    reducing the bundle of services that comes with the basic product
  34. Two-part Pricing
    a price tactic that charges two separate amounts to consume a single g/s
  35. Consumer Penalties
    an extra fee paid by the consumer for violating the terms of the purchase agreement
  36. 2 Reasons for Consumer Penalties
    • suffer an irrevocable revenue loss
    • incur significant additional transaction costs should customers be unable or unwilling to complete their purchase obligations
  37. Product Line Pricing
    • setting prices for an entire line of products
    • is trying to achieve maximum profits or other goals for the entire line rather than a single component of the line
  38. Relationships among Products
    • complementarys
    • substitutes
    • neutral
  39. Joint Costs
    costs that are shared in teh manufacturing and marketing of several products in a product line
  40. Cost-Oriented Tactics during Inflation
    • culling products with a low profit margin
    • delayed-quotation pricing
    • escalator pricing
  41. Delayed-quotation Pricing
    a price tactic used for industrial installations and many accessory items in which a firm price is not set until the item is either finished or delivered
  42. Escalator Pricing
    • a price tactic in which the final selling price reflects cost increases incurred between the time the order is placed and the time delivery is made
    • often used only for extremely complex products that take a long time to produce
  43. Price Shading
    • a demand-oriented tactic during inflation
    • the use of discounts by salespeople to increase demand for one or more products in a line
  44. Ways to Create Buyer Dependency
    • cultivate selected demand
    • create unique offerings
    • change the package design
    • heighten buyer dependence
Card Set:
Marketing Chp 20
2011-12-05 04:34:46
Mktg 20

chp 20
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