question
price
answer
the amount of money charged for a product or service
or the sum of the values that customers exchange for the benefits of having or using the product or service
only element in marketing mix producing revenue
or the sum of the values that customers exchange for the benefits of having or using the product or service
only element in marketing mix producing revenue
question
break-even pricing
answer
setting price to break even on the costs of making and marketing a product, or setting price to make a target return
how many units would you have to sell to no longer lose money (but not yet making a profit)
break-even point = fixed cost/price - variable cost
how many units would you have to sell to no longer lose money (but not yet making a profit)
break-even point = fixed cost/price - variable cost
question
competition-based pricing
answer
setting prices based on competitors' strategies, prices, costs, and market offerings
should be according to relative value
should be according to relative value
question
cost-based pricing
answer
setting prices based on the costs of producing, distributing, and selling the product plus a fair rate of return for effort and risk
ex. Walmart or ALDI have lower costs of production so they can set lower prices
ex. Walmart or ALDI have lower costs of production so they can set lower prices
question
cost-plus pricing (markup)
answer
adding a standard markup to the cost of the product
question
customer value-based pricing
answer
uses buyers' perceptions of value as the key to pricing
must consider price along with all other marketing mix variables before setting a marketing program
assess customer needs + value perceptions first
must consider price along with all other marketing mix variables before setting a marketing program
assess customer needs + value perceptions first
question
experience curve (learning curve)
answer
drop in the average per-unit production cost that comes with accumulated production experience
ex. production becomes more organized/workers learn shortcuts + become more familiar with their equipment
ex. production becomes more organized/workers learn shortcuts + become more familiar with their equipment
question
fixed costs (overhead)
answer
costs that do not vary with production or sales level
rent, heat, exec salaries, machinery
rent, heat, exec salaries, machinery
question
good-value pricing
answer
offering the right combination of quality and good service at a fair price
ex. introducing less-expensive versions of established brand name products
ex. premium brands launching value versions (Mercedes-Benz releasing CLA Class)
ex. introducing less-expensive versions of established brand name products
ex. premium brands launching value versions (Mercedes-Benz releasing CLA Class)
question
total costs
answer
sum of fixed and variable costs
management wants to charge a price that will at least cover the total production costs
management wants to charge a price that will at least cover the total production costs
question
value-added pricing
answer
attaching value-added features and services to differentiate a company's offers and support higher prices
question
variable costs
answer
costs that vary with the quantity of output produced
expressed in units
materials, sale commissions, discounts
expressed in units
materials, sale commissions, discounts
question
demand curve
answer
curve that shows the number of units the market will buy in a given time period at different prices
normally - price goes down when quantity goes up
normally - price goes down when quantity goes up
question
price elasticity
answer
how the demand will change when price changes
question
inelastic
answer
demand hardly changes to small price changes
ex. tobacco, insulin
ex. tobacco, insulin
question
elastic
answer
demand would change greatly to price change
question
target costing
answer
pricing that starts with an ideal selling price based on customer value considerations, then targets costs that will ensure that the price is met
question
margin
answer
amount that the selling price exceeds the manufacturing cost of purchase price
question
pure competition
answer
market consists of many buyers and sellers trading in a uniform commodity
no single buyer has much effect on the going market price
not a lot of marketing efforts
ex. wheat, copper, financial securities
no single buyer has much effect on the going market price
not a lot of marketing efforts
ex. wheat, copper, financial securities
question
monopolistic competition
answer
market consists of many buyers and sellers who trade over a range of prices
range occurs because sellers can differentiate their offers to buyers
freely use branding, advertising, + personal selling
ex. Google setting Pixel smartphone apart not by price, but by the power of the brand + differentiating features
range occurs because sellers can differentiate their offers to buyers
freely use branding, advertising, + personal selling
ex. Google setting Pixel smartphone apart not by price, but by the power of the brand + differentiating features
question
oligopolistic competition
answer
market consists of only a few large sellers
price become competitive tool to battle for market/subscribers (must pay attention + respond to competitor pricing strategies)
ex. handful of providers controlling cable/satellite TV market (Comcast, Spectrum, AT&T, Dish)
price become competitive tool to battle for market/subscribers (must pay attention + respond to competitor pricing strategies)
ex. handful of providers controlling cable/satellite TV market (Comcast, Spectrum, AT&T, Dish)
question
pure monopoly
answer
market dominated by one seller
question
pricing strategy
answer
price floor = no profit below this price/determined by product costs
competition and external factors (nature of market + demand)
price ceiling = no demand above this price/determined by customer perception of value
competition and external factors (nature of market + demand)
price ceiling = no demand above this price/determined by customer perception of value
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