question

price strategy

answer

a basic, long term pricing framework that establishes the initial price for a product and and intended direction for price movement over the product life cycle

question

price skimming

answer

a pricing policy whereby a firm charges a high introductory price, often coupled with heavy promotion

question

penetration pricing

answer

a pricing policy whereby a firm charges a relatively low price for a product initially as a way to reach the mass market.

question

status quo pricing

answer

charging a price identical to or very close to the competition's price

question

unfair trade practice acts

answer

laws that prohibit wholesalers and retailers from selling below cost

question

price fixing

answer

an agreement between two or more firms on the price they will charge for a product

question

predatory pricing

answer

the practice of charging a very low price for a product with the intent of driving competitors out of business or out of a market

question

base price

answer

the general price level at which the company expects to sell the good or service

question

quantity discount

answer

a price reduction offered to buyers buying in multiple units or above a specified dollar amount

question

cumulative quantity discount

answer

a deduction from list price that applies to the buyer's total purchases made during a specific period

question

noncumulative quantity discount

answer

a deduction from list price that applies to a single order rather than to the total volume of orders placed during a certain period

question

cash discount

answer

a price reduction offered to a consumer, an industrial user, or a marketing intermediary in return for prompt payment of a bill

question

functional discount (trade discount)

answer

a discount to wholesalers and retailers for performing channel functions

question

seasonal discount

answer

a price reduction for buying merchandise out of season

question

promotional allowance (trade allowance)

answer

a payment to a dealer for promoting the manufacturer's products

question

rebate

answer

a cash refund given for the purchase of a product during a specific period

question

value based pricing

answer

setting the price at a level that seems to the customer to be a good price compared to the prices of other options

question

FOB origin pricing

answer

a price tactic that requires the buyer to absorb the freight cost from the shipping point

question

uniform delivered pricing

answer

a price tactic in which the seller pays the actual freight charges and bills every purchaser an identical, flat freight charge

question

zone pricing

answer

a modification of uniform delivered pricing that divides the U.S into segments or zones and charges a flat freight rate to all customers in a given zone

question

freight absorption pricing

answer

a price tactic in which the seller pays all or part of the actual freight charges and does not pass them on to the buyer

question

basing point pricing

answer

a price tactic that charges freight from a given (basing) point, regardless of the city from which the goods are shipped

question

single price tactic

answer

a price tactic that offers all goods and services at the same price (or perhaps two or three prices)

question

flexible pricing (variable pricing)

answer

a price tactic in which different customers pay different prices for essentially the same merchandise bought in equal quantities

question

price lining

answer

the practice of offering a product line with several items at specific price points

question

leader pricing (loss leader pricing)

answer

a price tactic in which a product is sold near or even below cost in the hope that shoppers will buy other items once they are in the store

question

bait pricing

answer

a price tactic that tries to get consumers into a store through false or misleading price advertising and then uses high pressure selling to persuade consumers to buy more expensive merchandise

question

odd even pricing (psychological pricing)

answer

a price tactic that uses odd numbered price to connote bargains and even numbered prices to imply quality

question

price bundling

answer

marketing two or more products in a single package for a special price

question

unbundling

answer

reducing the bundle of services that comes with the basic product

question

two part pricing

answer

a price tactic that charges two separate amounts to consume a single good or service

question

consumer penalty

answer

an extra fee paid by the consumer for violating the terms of the purchase agreement

question

product line pricing

answer

setting prices for an entire line of products

question

joint costs

answer

costs that are shared in the manufacturing and marketing of several products in a product line

question

delayed quotation pricing

answer

a price tactic used for industrial installations and many accessory items in which a firm price is not set until the items is either finished or delivered.

question

escalator pricing

answer

a price tactic in which the final selling price reflects cost increases incurred between the time the order is placed and the time delivery is made

question

price shading

answer

the use of discounts by salespeople to increase demand for one or more products in a line

question

The first step in setting the right price is?

answer

establish pricing goals

question

A profit maximization objective may require a bigger initial investment than the firm can commit to or want to commit to? T/F

answer

True

question

Reaching the desired market share often means sacrificing short term profit because without careful management, long term profit goals may not be met? Y/N?

answer

Yes

question

If a firm launches a new item resembling several others already on the market, its pricing freedom will be ____. to succeed, the company will probably have to charge a price close to the average market price. In contrast, a firm that introduces a totally new product with no close substitutes will have considerable pricing ____.

answer

restriction ; freedom

question

pricing research is a overused tool? T/F

answer

False (15% of companies do serious pricing research)

question

Strategic pricing decision tends to be made without an understanding of the likely buyer or the competitive response? T/F

answer

True

question

~ companies often use this strategy for new products when the products are perceived by the target markets as having unique advantages. ~ Uses the "sliding down the demand curve" ~ Works best when the market is willing to buy the product even though it carries an above average price ~ Managers follow this when production cannot be expanded rapidly because of technological difficulties, shortages, or constraints imposed by the skill and time required to produce a product ~ Encourages competitors to enter the market ~ Enables management to recover its product development costs quickly ~ Uses tactic called anchoring (where you place a very expensive item that makes the other items look cheaper)

answer

price skimming

question

~ Designed to capture a large share of a substantial market results in lower production costs ~ Requires a higher volume of sales to break even ~ Discourages competition ~ Effective in a price sensitive market

answer

Penetration pricing

question

Penetration pricing can also be _____ if an experience curve will cause costs per unit to drop significantly

answer

effective

question

A skimming or a penetration strategy depends on the status of the country? Explain

answer

Yes. Developing country will need a penetration strategy and a Developed country needs a skimming strategy

question

Advantage: simplicity Disadvantage: may ignore demand or cost or both

answer

status quo pricing

question

To protect small local firms from giants. Will be also if wholesaler or retailer can provide "conclusive proof" that operating costs are lower than the minimum required figure, lower prices may be allowed.

answer

Unfair trade practice acts

question

Such practices are illegal under the Sherman Act and the Federal Trade Commission Act?

answer

Price fixing

question

Violates the ____- ____ ___ when it meets the following six criteria 1. Price Discrimination 2. Transaction occurs in interstate commerce 3. Discriminate by price among two or more purchases 4. Must be a commodity 5. Goods have to be changeable and substitutable 6. Signficiant competitive injury

answer

Robinson Patman Act

question

What are the Robinson Patman Act three defenses for a seller charged with price discrimination?

answer

cost, market conditions, competition

question

Fine tuning techniques are long run approaches that do not change the general price level? T/F

answer

False

question

What are the two types of quantity discounts? Which one encourages customer loyalty and which one encourages large quantity orders?

answer

cumulative quantity discounts and noncumulative quantity discount

question

temporary inducement that can be taken away without altering the basic price structure?

answer

Rebate

question

Creates a huge increase in sales, but not without cost to the manufacturers. Its goal is to enable purchasers to borrow money to pay for new cars with not interest charge.

answer

zero percent financing

question

Price of the product is set at a level that seems to the customer to be a good price compared with the prices of other options.

answer

value based pricing

question

~ Removes price comparisons from the buyer's decision making process. ~ Continually rising costs are a headache for retailers following this strategy

answer

single price tactic

question

~ Lack of consistent profit margins, the potential ill will of high paying purchasers, the tendency for salespeople to automatically lower the price to make a sale, and the possibility of a price war among sellers. ~ Allows the seller to adjust for competition by meeting another seller's price

answer

flexible pricing (variable pricing)

question

~ Must negotiate two prices, one for the new product, and one for the existing product ~ Customers tend to care more about the trade value then the price for the new product

answer

trade in

question

~ Is used by people with lengthy experience, training, and often certification by a licensing board

answer

professional services pricing

question

~ Enable a seller to reach several market segments ~ Sellers can offset rising cost by stocking lower quality merchandise at each price point, by changing the price and confusing buyers, and accepting lower profit margins and hold quality.

answer

price lining

question

~Normally used on well know items that consumers can easily recognize as bargains ~ Genuine attempt to give the consumer a reduced price

answer

leader pricing

question

What sold more? Products at .99 or .00?

answer

.99

question

Even numbered pricing is often used for?

answer

prestige items

question

~Can stimulate demand for the bundled items if the target market perceives the price as a good value ~ Can help cover fixed cost and generate profit

answer

price bundling

question

What is the key to consumption behavior?

answer

how closely consumers can link the costs and benefits of the exchange

question

Consumers prefer this pricing because they are uncertain about the number and the types of activities they might use

answer

two part pricing

question

What can come into play in a "pay what you want" environment?

answer

social pressures

question

What to do so you can prevent irrevocable revenue loss and/or incur significant additional transaction costs?

answer

consumer penalties

question

Marketing manager tries to achieve maximum profits or other goals for the entire line rather than for a single component of the line?

answer

product line pricing

question

When items are complementary, substitutes, or have a neutral relationship we use what type of pricing?

answer

product line pricing

question

~ Culling products with a low profit margin from the product line ~ Backfires because high volume of sales on an item with a low profit margin may still make the item highly profitable, elimination a product may reduce economies of scale and affect the price quality image of the entire line

answer

cost oriented tactic

question

What tactic are we using? Demand or cost oriented when we cultivate selected demand, create unique offerings, change package design, heightens buyer dependence?

answer

Demand oriented

question

Excellent time to build market share because competitors are struggling to make ends meet. Use value based pricing and bundling/unbundling. Also renegotiate contracts with suppliers, offer help to supplier, keep the pressure on, and paring down suppliers. This is what type of economic trouble? Inflation or recession?

answer

Recession

Chapter 20 ~ Marketing – Flashcards

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