chp 19

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  1. Price
    that which is given up in an exchange to acqire a g/s
  2. Two Roles of Price
    • sacrifice effect of price: usually money but sometimes time
    • information effect of price: higher prices can convey the status of the purchaser to other people
  3. Revenue
    the price charged to customers multiplied by the number of untes sold
  4. Profit
    revenue - expenses = profit
  5. 3 Pricing Objective Categories
    • profit oriented
    • sales oriented
    • status quo
  6. Profit Maximization
    method of setting prices that occurs when marginal revenue equals marginal cost
  7. Ways to Maximize Profits
    • try to expand revenue by increasing customer satisfaction
    • reduce costs by operating more efficiently
    • or do both
  8. Satisfactory Profits
    reasonable level of profits
  9. Return on Investment (ROI)
    • net profit after taxes divided by total assets
    • the higher the ROI, the better off the firm is
  10. Market Share
    • a company's roduct sales as a percentage of total sales for that industry
    • may be expressed in dollars or units
  11. Sales Maximization
    this firm ignores profits, competition and the marketing environment as long as sales are rising.
  12. Status Quo Pricing
    • a pricing objective that maintains existing prices or meets the competition's prices
    • requires little planning
  13. Demand
    the quantity of a product that will be sold in the market at various prices for a specified period
  14. Supply
    the quantity of a product that will be offered to the market by a supplier at various prices for a specified period
  15. Price Equilibrium
    the price at which demand and supply are equal
  16. Elasticity of Demand
    consumers' responsiveness or sensitivity to changes in price
  17. Elastic Demand
    a situation in which consumer demand is sensitive to changes in price
  18. Inelastic Demand
    a situation in which an increase or a decrease in price will not significantly affect demand for the product
  19. Unitary Elasticity
    a situation in which total revenue remains the same when prices change
  20. Ways to Measure Elasticity
    • price down & rev up - demand is elastic
    • price down & rev down - demand is inelastic
    • price up & rev up - demand is inelastic
    • price up & rev down - demand is elastic
  21. Factors that Affect Elasticity
    • availability of substitutes
    • price relative to purchasing power
    • product durability
    • a product's other users
    • rate of inflation
  22. Yield Management Systems (YMS)
    a technique for adjusting prices that uses complex mathematical software to profitably fill unused capacity by discounting early purchases, limiting early sales at these discounted prices, and overbooking capacity
  23. Variable Cost
    a cost that varies with changes in the level of output
  24. Fixed Cost
    a cost that does not change as output is increased or decreased
  25. Average Variable Cost (AVC)
    total variable costs divided by quantity of output
  26. Average Total Cost (ATC)
    total costs divided by quantity of output
  27. Marginal Cost (MC)
    the change in total costs associated with a one-unit change in output
  28. Markup Pricing
    the cost of buying th eproduct fro the producer, plus amounts for profit and for expenses not otherwise accounted for
  29. Keystoning
    the practice of marking up prices by 100% or doubling the cost
  30. Marginal Revenue (MR)
    the extra revenue associated with selling an extra unit of output or the change in total revenue with a one-unit change in output
  31. Break-Even Analysis
    a method of determing what sales volume must be reached before total revenue equals total costs
  32. Other Factors that Influence Price
    • stages in the product life cycle
    • the competition
    • the product distribution strategy
    • the promotion strategy
    • perceived quality
  33. Pricing & the Introductory Stage
    • prices set high in hopes of recovering development costs
    • demand originates in the core of the market
  34. Pricing & Growth Stage
    • prices generally begin to stabilize
    • competitors have entered the market, increasing the available supply
    • economies of scale are lowering costs
  35. Pricing & the Maturity Stage
    • brings further price decreases as competition increases
    • price increases are usually cost initiated, not demand initiated
  36. Pricing & Demand Stage
    • further price decreases
    • if only 1 firm left in market, prices will begin to rise again
  37. Selling Against the Brand
    stocking well-known branded items at high prices in order to sell store brands at discounted prices
  38. Extranet
    a private electronic network that links a company with its suppliers and customers
  39. 2 Types of Shopping Bots
    • broad-based type: searches a wide range of product categories
    • niche-oriented type: searches for only 1 type of product
  40. Prestige Pricing
    charging a high price to help promote a high-quality image
Card Set
chp 19
Chapter 19
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