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35 Cards in this Set
- Front
- Back
Price
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The overall sacrifice a consumer is willing to make to acquire a specific product or service
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Profit orientation
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A company objective that can be implemented by focusing on target profit pricing, maximizing profits, or target return pricing
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Target profit pricing
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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
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Maximizing profits
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A profit strategy that relies primarily on economic theory. If a firm can accurately specify a mathematical model that captures all the factors required to explain and predict sales and profits, it should be able to identify the price at which its profits are maxamized
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Target return pricing
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A pricing strategy implemented by firms less concerned with the absolute level of profits and more interested in the rate at which their profits are generated relative to their investments; designed to produce a specific return on investment, usually expressed as a percentage of sales
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Sales Orientation
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Belief that increasing sales will help the firm more than will increasing profits
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Premium Pricing
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The firm deliberately prices a product above the prices set for competing products to capture those customers who always shot for the best or for whom price does not matter
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Competitor orientation
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Strategize according to the premise that they should measure themselves primarily against their competition
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Competitive parity
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Set prices similar to those of their major competitors
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Status quo pricing
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Changes in price only to meet those of the competition
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Customer Orientation
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A firm should measure itself primarily according to whether it meets its customers' needs
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Demand curve
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Shows how many units of a product or service consumers will demand during a specific period of time at different prices
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Prestige products/services
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Consumers purchase for their status rather than their functionality
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Price elasticity of demand
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Measures how change in a price affect the quantity of the product. % change in demand/ % change in price
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Elastic
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The market for a product or service is price sensitive
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Inelastic
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The market for a product is price insensitive
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Income Effect
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Refers to the change in the quantity of a product demand by consumers due to a change in their income
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Substitution Effect
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Refers the the consumers' ability to substitute other products for the focal brand
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Cross-price elasticity
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The % change in the quantity of Product A demanded compared with the % change in price Product B
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Complementary products
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Products whose demands are positively related, such that they rise and fall together
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Substitute Products
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Changes is their demand are negatively related
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Variable Costs
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Costs, primarily labor and materials, that vary with production volume
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Fixed Costs
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Costs that remain essentially at the same level, regardless of any changes in the volume of production
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Total Costs
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Simply the sum of the variable and fixed costs
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Break-even analysis
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The relationships among cost, price, revenue, and profit over different levels of production and sales
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Break-even point
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The point at which the number of units sold generates just enough revenue to equal the total costs
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Contribution per unit
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Price- variable cost per unit
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Monopoly
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One firm controls the market
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Oligopoly
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A handful of firms control the market
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Monopolistic Competition
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Many firms selling differentiated products at different prices
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Pure Competition
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Many firms selling commodities for the same prices
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Price war
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Occurrence in oligopolistic markets compete by lowering prices
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Predatory pricing
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A firm sets a very low price for one or more of its products with the intent to drive its competition out of business
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Gray market
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Employs irregular but not necessarily illegal methods. Sells goods at prices lower than those intended by the manufacture
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Cross-shopping
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The pattern of buying both premium and low-priced merchandise or patronizing both expensive, status-oriented retailers and price-oriented retailers
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