Contemporary Marketing Chapter 18

Exchange value of a good or service.
Robinson-Patman Act
Federal legislation prohibiting price discrimination not based on a cost differential; also prohibits selling at an unreasonably low price to eliminate competition.
Unfair-trade laws
State laws requiring sellers to maintain prices for comparable merchandise.
Fair-trade laws
Statutes enacted in most states that once permitted manufacturers to stipulate minimum retail price of their product.
Marginal analysis
Method of analyzing the relationship between costs, sales price, and increased sales volume.
Profit maximization
Point at which the additional revenue gained by increasing the price of a product equals the increase in total costs.
Target-return objective
Short-run or long-run pricing objectives of achieving a specified return on either sales or investment.
Market-share objective
Volumes related pricing objective in which the goal is to achieve control of a portion of the market for a firms road or service.
Profit Impact of Market Strategies (PIMS) project
Research that discovered a strong positive relationship between a firm’s market share and product quality and its return on investment.
Value pricing
Pricing strategy emphasizing benefits derived from a product in comparison to the price and quality levels of competing offerings.
Customary Prices
Traditional prices that customers expect to pay for certain goods and services.
Schedule of the amounts of a firm’s product that consumers will purchase at different prices during a specified time period.
Schedule of the amounts of a good or service that firms will offer for sale at different prices during a specified time period.
Pure competition
Market structure characterized by homogeneous products in which there are so many buyers and sellers that none has a significant influence on price.
Monopolistic competition
Market structure involving a heterogenous product and product differentiation among competing suppliers, allowing the marketer some degree of control over prices.
Market structure in which relatively few suppliers compete and where high start-up costs form barriers to keep out new competitors.
Market structure in which a single seller dominates trade in a good or service for which buyers can find no close substitutes.
Variable costs
Costs that change with the level of production (such as labor and raw materials costs).
Fixed costs
Costs that remain stable at any production level within a certain range (such as lease payments or insurance costs).
Average total costs
Costs calculated by dividing the sum of the variable and fixed costs by the number of units produced.
Marginal cost
Change in total costs that results from producing an additional unit of output.
Measure of responsiveness of purchasers and suppliers to a change in price.
Cost-plus pricing
Practice of adding a percentage of specified dollar amount-or markup-to the base cost of a product to cover and provide a profit.
Full-Cost pricing
Pricing method that uses all relevant variable costs in setting a product’s price and allocates those fixed costs not directly attributed to the production of the priced item.
Incremental-cost pricing
Pricing method that attempts to use only costs directly attributable to a specific output in setting prices.
Break-even analysis
Pricing technique used to determine the number of products that must be sold at a specified price to generate enough revenue to cover total cost.
Modified break-even analysis
Pricing technique used to evaluate consumer demand by comparing the number of products that must be sold at a variety of prices to cover total cost with estimates of expected sales at the various prices.
Yield management
Pricing strategy that allows marketers to vary prices based on such factors as demand, even though the cost of providing those goods or services remains the same.

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