Vocabulary
To set the initial price low for the introduction of the new product or service
Penetration Pricing Strategy
The reductions retailers take on the initial selling price of the product or service
Markdowns
An additional reduction offered as an incentive to retailers to order merchandise in advance of the normal buying season
Seasonal Discounts
When the store lures customers in with a very low price on an item, only to aggressively pressure them into purchasing a higher priced model by disparaging the low priced item
Bait-and-Switch Tactic
Cost-based pricing, Competition-based pricing, Value-based pricing
Considerations for Setting Pricing Strategies
Consumers may be willing to pay more up front if using cheaper alternatives will cost more over time
Cost of Ownership Method for Setting Prices
The larger the quantity, the less the cost per ounce
Quantity Discounts/Size Discount
An additional reduction that reduces the invoice cost if the buyer pays the invoice prior to the end of the discount period
Cash Discounts
When firms sell the same product to different resellers (wholesalers, distributors, or retailers) at different prices
Price Discrimination
Adds value by reducing consumers’ search costs, while consumers can spend less of their valuable time comparing prices, including sale prices, at different stores
Every Day Low Pricing
The long term approach to setting prices broadly in an integrative effort based on the five Cs of pricing
Pricing Strategies
Offered to consumers are price reductions offered on products and services to stimulate demand during off peak seasons
Seasonal Discount
Additional price reductions offered in return for specific behaviors
Allowances
Colluding with other firms to control prices
Price Fixing
Will ideally build sales, market share, and profits quickly by providing an incentive to purchase the product immediately
Market Penetration Pricing
To offer short term methods to focus on select components of the five Cs
Pricing Tactics
Offer a discount on the price of specific items when they’re purchased
Coupons
Different prices depending on the geographic delivery area
Zone pricing
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
Explain the difference between EDLP and high/low pricing
EDLP: companies stress the continuity of their retail prices at a level somewhere between the regular, non sale price and the deep discount sale prices their competitors may offer
High/Low Pricing: relies on the promotion of sales, during which prices are temporarily reduced to encourage purchases
When the unit cost drops significantly as the accumulated volume sold increases
Experience Curve Effect
Occur when the manufacturer issues a refund as part of the purchase price
Rebates
Shipper charges one rate, no matter where zone pricing the buyer is located
Uniform Delivered Pricing
Is deemed illegal by both the Sherman antitrust Act and the Federal Trade commision act because it represents unfair trade and contributes to oligopolistic competition
Predatory Pricing
Clayton Act and Robinson-Patton act both make this illegal
Price Discrimination