MKTG Final CH11

  1. Demand - based pricing
    A price-setting method based on estimated of demand at different prices.
  2. Law of Demand Curve
    as price goes up, quantity demanded goes down.

    steep line = inelastic demand

    estimating price elasticity of demand = %change in sales / %change in price
  3. Cross-elasticity of demand
    When changes in the price of one product affect the demand for another item.
  4. Variable Costs
    The cost of production that are tied to and vary depending on the number of units produced.
  5. Fixed Costs
    Costs of production that do not change with the number of units produced.
  6. Total Costs
    The total of the fixed costs and the variable costs for a set number of units produced.
  7. Break-even point
    Point at which the total revenue and total costs are equal and beyond which the company makes a profit. the firm will suffer a loss below that point.
  8. Contribution per unit
    The contribution from each sale to fixed costs.
  9. Marginal Analysis
    A method that uses cost and demand to identify the price that will maximize profits.
  10. Steps in Price Planning (DEDECD)
    • 1 - Develop Pricing Objectives
    • 2 - Estimate Demand
    • 3 - Determine costs of goods sold
    • 4 - Evaluate the pricing environment
    • 5 - Chose a price Implementation strategy
    • 6 - Develop Pricing Tactics
  11. Marginal Cost
    Increase in total cos that results from producing one additional unit of a product.
  12. Demand
    The quantity of a product customers are going to buy.
  13. Cost-plus pricing
    A method of setting prices in which the seller totals all the costs for the product and then adds the amount to arrive at the selling price.
  14. Yield Management Pricing
    A practice of charging different prices to different customers in order to manage capacity while maximizing revenues.
  15. Price Leadership
    Pricing strategy where one firm sets it's price and other firm's in the industry follow with the same or very similar prices.
  16. Value Pricing or everyday low pricing (EDLP)
    A pricing strategy where a firm sets prices that provide ultimate value to customers.
  17. Trial Pricing
    Pricing a new product low for a limited period of time in order to lower the risk for a customer.
  18. Skimming Price
    A very high premium price a firm charges for a new products into stage.
  19. Penetration Pricing
    Pricing strategy where a firm introduces a product at a very low price to encourage more customers to purchase it.
  20. Elastic Demand
    Demand in which changes in price have large effects on the amount demanded.
  21. Prestige Products
    Products that have a high price and that appeal to status-conscious customers.
  22. Price Bundling
    Selling two or more goods or services as a single package for one price.
  23. Price Lining
    The practice of setting a limited number of different specific prices, called price points, for items in a product line.
  24. Bait-and-Switch
    An illegal marketing practice where an advertising price special is used as bait to get customers into the store with the intention of switching them to a higher product.
  25. Loss Leader Pricing
    A retail or manufacturer pricing policy of setting prices very low or even below costs on one product or product line to attract customers into a store.
  26. Predatory Pricing
    Illegal pricing strategy in which a company sets a very low price for the purpose of driving competitors out of business.
  27. Dynamic Pricing
    A pricing strategy where the price can easily be adjusted to meet changes in the marketplace.
Card Set
MKTG Final CH11
Pricing Terms