Five C's of Pricing
Pricing Strategies
Legal and Ethical Aspects of Pricing
Definitions
Economics
100
The sum of variable and fixed costs
Total cost
100
A long-term approach to setting prices for the firm's products.
Pricing strategy
100
The practice of colluding with other firms to control prices.
Price fixing
100
The overall sacrifice a consumer is willing to make to acquire a specific product or service.
Price
100
Shows how many units of a product or service consumers will demand during a specific period at different prices.
Demand curve
200
Name 1st and 4th C.
Company objectives and Competition
200
The goal of a(n) ___ strategy is to generate profit and establish a new product or service in the market as quickly as possible.
market penetration
200
The practice of selling the same product to different resellers or to the ultimate consumer at different prices.
price discrimination
200
Technique used to examine the relationships among cost, price, revenue, and profit over different levels of production and sales.
break-even analysis
200
The percentage change in demand for Product A that occurs in response to a percentage change in price of Product B; see also complementary products.
cross-price elasticity
300
What is another term for target return percentage?
Markup
300
DOUBLE!!! When a new product or service is launched, what type of pricing strategy attempts to attract customers quickly by offering a very low price at first?
Penetration pricing
300
DOUBLE!!!! The price that manufacturers suggest retailers use to sell their merchandise.
manufacturer’s suggested retail price (MSRP)
300
A pricing strategy implemented by firms when they have a particular profit goal as their overriding concern; uses price to stimulate a certain level of sales at a certain profit per unit.
target profit pricing
300
Measures how changes in a price affect the quantity of the product demanded; specifically, the ratio of the percentage change in quantity demanded to the percentage change in price.
price elasticity of demand
400
a company objective that can be implemented by focusing on target profit pricing, maximizing profits, or target return pricing.
profit orientation
400
Price skimming is often used for high demand ______.
Video games
400
Occurs when competitors that produce and sell competing products collude, or work together, to control prices, effectively taking price out of the decision process for consumers.
horizontal price fixing
400
A company objective based on the belief that increasing sales will help the firm more than will increasing profits.
sales orientation
400
A demand curve shows that a company will sell 10,000 units if it prices its new product at $200 per unit, but it will sell 20,000 units if it reduces the price to $75. Where should the company set the price of the new product in order to maximize profits?
$200
500
DOUBLE!!! Name the 5 C's of Pricing IN ORDER
Company objectives, customers, costs, competition, channel members
500
DOUBLE!!!! How much was the discount for the first example image in the pricing strategies section? (Hint: They were shoes)
50%
500
Employs irregular but not necessarily illegal methods; generally, it legally circumvents authorized channels of distribution to sell goods at prices lower than those intended by the manufacturer.
gray market
500
The drop in unit cost as the accumulated volume sold increases; as sales continue to grow, the costs continue to drop, allowing even further reductions in the price.
experience curve effect
500
DOUBLE!!! Suppose that good weather increases the supply of avocados. Avocados are an input in the production of guacamole, and guacamole is in turn a consumption substitute for salsa. The equilibrium price of salsa will __________ and the equilibrium quantity of salsa will ________.
fall; fall