Pricing Concepts and Setting The Right Price

11/24/2015
PricingConceptsandSettingtheRightPriceflashcards|Quizlet
Pricing Concepts and Setting the Right

Price
41 terms by abfoley24
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Price
Price is that which is given up in an

exchange to acquire a good or service
price allocates resources in a freemarket economy
the importance of price to the seller
price is revenue
the importance of price to the

consumer
price is the cost of something
Revenue
the price charged to customers

multiplied by the number of units sold
Profit
revenue minus expenses
https://quizlet.com/63573236/pricingconceptsandsettingtherightpriceflashcards/
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5 Trends influencing Price
flood of new products

increased availability of bargain-priced
private and generic brands
price cutting as a strategy to maintain
or regain market share
internet used for comparison shopping
US recession from late 2007 to 2009
and beyond
3 Pricing Objectives
Profit oriented
Sales oriented
Status quo
3 Profit-oriented Pricing Objectives
Profit maximization
Satisfactory Profits
Target ROI
2 Sales-Oriented Pricing Objectives
Market share
Sales Maximization
2 Status Quo Pricing Objectives
Maintain existing prices

Meet competition's prices
Demand
the quantity of a product that will be

sold in the market at various prices for
a specified period
Supply
the quantity of a product that will be

offered to the market by a supplier at
various prices for a specified period
Elastic demand
consumers buy more or less of a

product when the price changes
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Inelastic demand
an increase or a decrease in price will

not significantly affect demand
Unitary elasticity
an increase in sales exactly offsets a

decrease in prices, so total revenue
remains the same
5 factors that affect elasticity of

demand
availability of substitutes
price relative to purchasing power
product durability
a product's other uses
rate of inflation
Variable cost
varies with changes in level of output
Fixed cost
does not change as level of output

changes
Markup pricing
the cost of buying the product from the

producer plus amounts for profit and
for expenses not otherwise accounted
for
Keystoning
the practice of marking up prices by

100 percent, or doubling the costs
Profit maximization
a method of setting prices that occurs

when marginal revenue equals
marginal cost
Marginal Revenue
the extra revenue associated with

selling an extra unit of output, or the
change in total revenue with a one-unit
change in output
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5 other determinants of Price
Stages of the PLC

Competition
Distribution strategy
Promotion strategy
Perceived quality
Stages in PLC and relative price status
Intro Stage- prices high

Growth Stage- prices stabilize
Maturity Stage- price decreases
Decline Stage- price decreases
Competition
high prices may induce firms to enter

the market
can lead to price wars
Manufacturers Distribution Strategy
offer a larger profit margin or trade

allowance
use exclusive distribution
franchising
avoid business with price-cutting
discounters
develop brand loyalty
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6 dimensions of quality
ease of use
versatility
durability
serviceability
performance
prestige
5 steps in new-product development

process
establish pricing goals

estimate demand, costs, and profits
choose a price strategy
fine-tune with pricing tactics
results lead to the right price
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 PLC
Price skimming
a firm charges a high introductory

price, often coupled with heavy
promotion
Penetration pricing
a firm charges a relatively low price for

a product initially as a way to reach the
mass market
Status Quo pricing
charging a price identical to or very

close to the competition's price
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5 situations when price skimming is

successful
inelastic demand
unique advantages/superior
legal protection of product
technological breakthrough
blocked entry to competitors
Advantages of penetration pricing
can lead to lower cost per unit as

production expands
discourages or blocks competition from
market entry
boosts sales and provides large profit
increases
Disadvantages of penetration pricing
requires gear up for mass production

selling large volumes at low prices
strategy to gain market share may fail
Advantages of status quo pricing
simplicity
safest route to long-term survival for
small firms
Disadvantages of status quo pricing
strategy may ignore demand and/or

cost
High inflation involves what tactics
cost-oriented tactics
demand-oriented tactics
4 strategies to make demand more

inelastic
cultivate selected demand

create unique offerings
change the package design
heighten buyer dependence
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Recession involves what..
value-based pricing
bundling or unbundling
3 new product traps
price benefits instead of value

manage customer risk with price
fail to manage post-launch price
trajectory
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Pricing Concepts and Setting the Right

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Price is that which is given up in an

the importance of price to the seller

the importance of price to the

price is the cost of something

the price charged to customers

revenue minus expenses

5 Trends influencing Price

flood of new products

3 Profit-oriented Pricing Objectives

2 Sales-Oriented Pricing Objectives

2 Status Quo Pricing Objectives

Maintain existing prices

the quantity of a product that will be

the quantity of a product that will be

consumers buy more or less of a

an increase or a decrease in price will

an increase in sales exactly offsets a

5 factors that affect elasticity of

varies with changes in level of output

does not change as level of output

the cost of buying the product from the

the practice of marking up prices by

a method of setting prices that occurs

the extra revenue associated with

5 other determinants of Price

Stages of the PLC

Stages in PLC and relative price status

Intro Stage- prices high

high prices may induce firms to enter

Manufacturers Distribution Strategy

offer a larger profit margin or trade

5 steps in new-product development

establish pricing goals

a basic, long-term pricing framework

a firm charges a high introductory

a firm charges a relatively low price for

Status Quo pricing

charging a price identical to or very

5 situations when price skimming is

Advantages of penetration pricing

can lead to lower cost per unit as

Disadvantages of penetration pricing

requires gear up for mass production

Advantages of status quo pricing

Disadvantages of status quo pricing

strategy may ignore demand and/or

High inflation involves what tactics

4 strategies to make demand more

cultivate selected demand

Recession involves what..

3 new product traps

price benefits instead of value

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