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33 Cards in this Set
- Front
- Back
Price
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The assignment of value or the amount the customers must exchange to receive the offering
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How important are good pricing decisions?
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Most customers rank a "resonable price" (fair or affordable) as the most
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Steps in the Price Planning
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1. Developing Price Objectives
2. Estimate Demand 3. Determine Costs 4. Evaluate the Pricing Environment 5. Choose a pricing strategy 6. Develp pricing tactics |
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Most important step of Price planning
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Developing Price Objectives--wherein one determine the pricing objective BEFORE extablishing a price
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How can marketers influence the nature of the demand curve?
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By shifting it upwards
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The effect of an upwards shift in a demand curve is...
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to increase quantity demand for a given price
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Acceleration Principle
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Principle that holds that a small change in consumer demand for a product can result in a large change in the demand for org goods and services to produce the product
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Elastic Demand
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Demand in which changes in price have large effects on the amount demanded--Lesuire, activities, vacations
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Interpretation of Price Elasticity of Demand
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if the calculated price elasticity is greater than 1, demand is elastic
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Variable Costs
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The cots of production (raw and processed materials, parts and labor) that are tied to and vary depending on the number of units produced
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Fixed Costs
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Costs of production that do not change with the number of units produced (costs of owning and maintaining the factory, utilities, equipment costs, salaries of firm executives)
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Break-Even Point
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point at which the total revenue and total costs are equal and beyond which the company makes a profit: below that point the firm will suffer a loss
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Profit is maximized at what point?
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marginal cost is exactly equal to marginal revenue
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Everyday low pricing (EDLP)
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form of pricing based on customer needs
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The size of the basket
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key to building business and the EDLP stores have certainly achieved this more effectively than those retailers pursuing a Hi/Low Strategy
*The answer is EDLP |
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Penetration Pricing
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Pricing strategy in which a firm introduces a new product at a very low price to encourage more customers to purchase it.--this is often used to discourage competitors from entering the marketplace--here penetration pricing acts as a barrier to entry
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Two-Part Pricing requires
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2 seperate types of payments to purchase the product
EX: ISU's recreating venter requires an annual user fee PLUS a court fee for racquetball |
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Price Bundling
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Selling two or more goods or services as a single package for one price
EX: all you can eat restaurant specials--Model packages for automobiles, TV services |
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F.O.B. Origin Pricing
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pricing tactic in which the cost of transporting the product from the factory to the customer's location is the responsibility of the customer
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F.O.B. Delivered Pricing
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pricing tactic in which the cost of transporting the product from the factory to the customer's location is included in the selling price and is paid by the manufacturer
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Basing-Point Pricing
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pricing tactic where customer pay shipping charges from set basing point locations whether the goods are actually shipped from these points or not
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Uniform Delivered Pricing
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pricing tactic in which a firm adds a standard shipping charge to the price for all customers regardless of location
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Freight Absorption Pricing
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pricing tactic in which the seller absorbs the total cost of transportation
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Forms of Distribution-based pricing
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FOB Origin Pricing, FOB Delivered Pricing, Basing-Point Pricing, Uniform Delivered Pricing, Freight Absorption Pricing
*"Price Bundling" is not one of these |
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Cash Discounts
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Enticing customers to pay their bills quickly
EX: "2% 10 days, net 30 days means that the amount due is 2% less IF the bill is paid within 10 days, and the bill is due in 30 days regardless |
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Internal Reference Prices- Psychological Issues in pricing
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set price or a price range in consumers' minds that they refer to in evaluating a product's price
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Assimilation--Internal Reference prices
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effects occurs when two equal (substitute) products involve the same internal reference points
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Contrast effects--Internal Reference Prices
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occur when two products are far apart (big quality differences). You need contrast to occur to support higher prices when compared to competitice products
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Price Lining
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practice of setting a limited number or different specific prices, called price points, for the items in a product line
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Price Points
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prices for which demand is relatively high
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Ball-and-Switch
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an illegal marketing practice in which an advertised price special is used to as ball to get customers into the store with the intention of switching them to a higher-priced item--Here there is never an intention to sell the ball item (ex- Circuit City and Great Lakes)
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Predatory pricing
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a company sets a very low price for the purpose of driving competitors out of business
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In the Article "The Price is Unfair! A Conceptual Framework of Price Fairness Perceptions"
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we define price fairness as a consumer's assessment and associated emotions of whether the difference (or lack of difference) between a seller's price and the price of a comparative other party is reasonable, acceptable or justifiable.
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