-
Pricing
The process a co uses to determine the amount to charge a customer for a product.
-
Pricing Objective
A goal that a co. wants to achieve when pricing a product.
-
Profit-Oriented Pricing Objective
A pricing objective that focuses on the absolute or relative return that a co. wants a product to generate.
-
Target Return Objective
A profit-oriented pricing objective that typically sets a specific level of profit as an objective.
-
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.
-
Competition-Oriented Pricing Objective
A pricing obj. related to maintaining or increasing a particular level of market share.
-
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.
-
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.
-
Nonprice Competition
A type of competition that exists when co's attempt to gain customers by using marketing mix factors other than price.
-
Direct Cost
A cost that is specifically traceable to or caused by a particular product.
-
Indirect Cost
A cost that is not directly traceable to any single product.
-
Fixed Cost
A cost that remains constant regardless of the amount or volume of a product sold over some determined time period.
-
Variable Cost
A cost that varies directly with changes in the amount or volume of a product sold.
-
Price Consciousness
A measure of the importance a specific customer attaches to price and the customer's overall awareness of price.
-
Purchasing Power
A measure of a customers ability to buy. AKA buying power.
-
Demand
The number of units of a product that a co. can sell under given conditions.
-
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.
-
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.
-
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.
-
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.
-
Surplus
The amount of assets that a co has over and above its policy reserves and other obligations.
-
Policy Reserves
Liability accounts that identify the amounts of $ that an insurer estimates it needs to pay policy benefits as they come due.
-
Pricing Strategy
A strategy that helps define the way a co establishes prices for its products.
-
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.
-
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.
-
Relationship Pricing
The practice of offering price reductions to customers who purchase multiple products from a co's product mix.
-
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.
-
Prestige Pricing
A form of psychological pricing that involves setting intentionally high prices for a product to convey an image of high quality.
-
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.
-
Price Leader
Product with price set intentionally low to attract customers who will buy more products at regular prices.
-
Loss Leader
A price leader that is priced below cost.
-
Competition-Driven Pricing Strategy
A pricing strategy where co sets prices relative to those charged by its competitors.
-
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.
-
Flexible Pricing
A competition driven pricing strategy where the price a co charges varies according to specific sales condtions. AKA variable pricing.
-
Competitive Bidding
A process where buyers ask potential suppliers to offer price quotes on a proposed contract.
-
Negotiated Contract
Contract with terms and prices of contract established thru talks b/t buyer & seller.
-
Preferred Risk Discount
A rate structure with reduced premium rates offered to PIs whose health/lifestyles indicate mortality rate lower than avg.
-
Quantity Discount
A rate structure, rates graded by the size of the policy.
-
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.
-
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.
-
Gender-Based Pricing
A rate structure that has different rates for males & females.
-
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.
-
Investment Margin
The difference b/t the investment rate the insurer assumes when pricing a product, and the the one the insurer actually earns.
-
Underwriting Margin
The difference b/t the benefit costs assumed in pricing, and the products actual benefit costs.
-
Expense Margin
The difference b/t operating expenses assumed when a product was priced, and expenses actually experienced.
|
|