A pricing arrangement that designates that a product’s title changes at its destination (the place to which it’s transported), and the seller pays the shipping charges.
FOB (free on board) origin
A pricing arrangement that designates that a product’s title changes at its origin (the place it’s purchased), and the buyer pays the shipping charges.
A U.S. act that limits price discrimination (charging different customers different prices for the same product and quantities of it purchased).
bait and switch
A pricing tactic a seller uses to lure in, or “bait,” customers with a low-priced product. The seller then attempts to persuade the buyer to purchase higher-priced products, perhaps by telling him or her that the low-priced product is no longer available.
A discount card or coupon purchasers can use on their next shopping visits during set dates.
breakeven point (BEP)
The amount (in units or dollars) where total revenue equals total costs.
A strategy firms use to price products when they know customers must buy specific replacement parts, such as razor blades, because there are no alternatives.
A pricing strategy where a certain amount of profit is added to the total cost of a product in order to determine its price.
demand backward pricing
Pricing a product based on what customers are willing to pay for it and then creating the offering based on that price.
everyday low pricing
The practice of charging a low initial price for an offering and maintaining that price throughout the offering’s product life cycle.
Overhead or costs that remain the same regardless of the level of production or the level of sales.
The process that occurs when a buyer lists what he or she wants to buy and sellers may submit bids.
Pricing whereby purchasers pay the same price for a product regardless of where they buy it or from whom.
A strategy of offering low prices on one or more items as “lead” items in advertisements to attract customers.
Products priced below cost; this is illegal in some states.
The amount (in dollars or percent) taken off the price.
A certain amount of money added to the cost of a product to set the final price.
A strategy in which a company prices products a few cents below the next dollar amount or a few dollars (for high-cost products such as automobiles) below the next hundred- or thousand-dollar value.
Bidding and negotiating prices online with buyers and sellers on sites such as eBay.com until an acceptable price is agreed upon.
A pricing strategy in which customers are allowed to break down product payments into smaller amounts they pay incrementally.
penetration pricing strategy
A strategy in which an organization offers a low initial price on a product so that it captures as much market share as possible.
When companies act in a predatory manner by setting low prices to drive competitors out of business.
The practice of pricing a product higher to signal that it is of high quality.
A change to the listed price of a product.
A strategy of selling different products or services together, typically at a lower price than if each product or service is sold separately.
The process of charging different customers different prices for the same product and quantities of it purchased.
Consumers are very sensitive to price changes and buy more at low prices and less at high prices.
The amount of sensitivity to price changes, which affects the demand for a product.
When firms get together and agree to charge the same prices.
Buyers are not sensitive to price changes and demand is relatively unchanged.
price lining (price levels)
Pricing a group of similar products (e.g., neckties) at a few different price levels (e.g., $25, $50, and $75).
What an organization wants to accomplish with its pricing.
product mix pricing
Deciding how to price a firm’s products and services that go together, such as power options (locks, windows) on a car.
A short-term tactic to get people to purchase a product or more of it.
Discounts buyers get for making large purchases.
Agreements whereby merchants agree to promote one another’s offerings to customers.
When the buyer lists what he or she wants to buy and also states how much he or she is willing to pay. The reverse auction is finished when at least one firm is willing to accept the buyer’s price.
sealed bid pricing
The process of offering to buy or sell products at prices designated in sealed bids.
skimming price strategy
A strategy whereby a company sets a high initial price for a product. The idea is to target buyers who are willing to pay a high price (top of the market) and buy products early.
An objective a firm sets to maintain its current prices and/or its competitors’ prices.
Fixed costs plus variable costs.
Discounts an organization gives its channel partners for performing different functions.
A pricing strategy in which providers have two different charges for a product, such as the base monthly rate for cell phone coverage and additional charges for extra minutes or texting.
unfair trade laws
State laws requiring sellers to keep a minimum price level for similar products.
A pricing strategy in which buyers pays the same shipping charges regardless of their locations.
Costs that change with the level of production or service delivery.