question

From a marketing viewpoint, ______ is the money or other considerations (including products and services) exchanged for the ownership or use of a product or service

answer

price

question

The practice of exchanging products and services for other products and services rather than for money is called _______

answer

barter -Barter transactions account for billions of dollars annually in domestic and international trade

question

Buyers are more willing to pay ______ _____ than a higher list price, so sellers use add-on charges as a way of having the consumer pay more without raising the list price

answer

extra fees

question

All the factors that increase or decrease the final price of an offering help construct a "_______ _______"

answer

price equation

question

List Price - Incentives + Allowances + Extra Fees = _____ _____

answer

Final Price

question

______ is the ratio of perceived benefits to price

answer

Value Value= Perceived benefits / Price

question

"The higher the price, the higher ______"

answer

quality

question

Total Revenue - Total Cost = _______

answer

Profit

question

_______-_______ Pricing Approaches weigh factors underlying expected customer tastes and preferences more heavily than such factors as cost, profit, and competition when selecting a price level

answer

Demand-Oriented

question

Pricing decisions influence both _____ _____ (sales) and _____ ______

answer

total revenue, total cost

question

A firm introducing a new or innovative product can use ________ ________, setting the highest initial price that customers really desiring the product are willing to pay

answer

skimming pricing -These customers are not very price sensitive because they weigh the new product's price, quality, and ability to satisfy their needs against the same characteristics of substitutes.

question

Setting a low initial price on a new product to appeal immediately to the mass market is _______ ______, the exact opposite of skimming pricing

answer

penetration pricing

question

_______ _______ involves setting a high price so that quality - or status-conscious consumers will be attracted to the product and buy it

answer

Prestige Pricing

question

Setting prices a few dollars or cents under an even number is known as _____-_____ ______

answer

odd-even pricing

question

A frequently used demand-oriented pricing practice is _______ ______ - the marketing of two or more products in a single package price

answer

bundle pricing

question

The charging of different prices to maximize revenue for a set amount of capacity at any given time is known as _____ _____ _______

answer

Yield Management Pricing

question

Examples of Demand-Oriented Pricing Approaches

answer

-Skimming -Penetration -Prestige -Odd-Even -Target -Bundle -Yield Management

question

With ______-______ approaches, a price setter stresses the cost side of the pricing problem, not the demand side. Price is set by looking at the production and marketing costs and then adding enough to cover direct expenses, overhead, and profit

answer

Cost-Oriented

question

_____ _____ _____ entails adding a fixed percentage to the cost of all items in a specific product class

answer

Standard Markup Pricing -The percentage markup varies depending on the type of retail store and the product involved

question

_____-_____ ______ involves summing the total unit cost of providing a product or service and adding a specific amount to the cost to arrive at a price

answer

Cost-Plus Pricing -Most commonly used method to set prices for business products

question

Examples of Cost-Oriented Pricing Approaches

answer

-Standard Markup Pricing -Cost-Plus Pricing

question

A price setter may choose to balance both revenues and costs to set price using _____-______ approaches

answer

Profit-Oriented -These might either involve a target of a specific dollar volume of profit or express this target profit as a percentage of sales or investment

question

When a firm sets an annual target of a specific dollar volume of profit, this is called ______ ______ _______

answer

Target Profit Pricing

question

Firms such as supermarkets often use _____ _______ _____ to set prices that will give them a profit that is a specified percentage of the sales volume

answer

Target ROS Pricing -This price method is often used because of the difficulty in establishing a benchmark of sales or investment to show much of a firm's effort is needed to achieve the target

question

Firms such as GM and many public utilities use _______ ______ ______ _______ to set prices to achieve a ROI target such as a percentage that is mandated by its board of directors or regulators

answer

Target ROI Investment Pricing

question

Rather than emphasize demand, cost, or profit factors, a _____ _____ can stress what competitors or "the market" is doing

answer

price setter

question

For some products where tradition, a standardized channel of distribution, or other competitive factors dictate the price, ______ ______ is used.

answer

Customary Pricing

question

The "______ _____" of a product is what customers are generally willing to pay, not necessarily the price that the firm sets.

answer

Market Price -For most products it is difficult to identify a specific market price for a product or product class

question

Companies use a "______ ______" to assess whether their products and brands are above, at, or below the market

answer

price premium

question

For a special promotion retail stores deliberately sell a product below its ______ _______ to attract attention to it.

answer

Customary Price -The purpose of this loss-leader pricing is not to increase sales but to attract customers in hopes they will buy other products as well, particularly the discretionary items with large markups.

question

A ______ _____ is a graph that relates the quantity sold and price, showing the maximum number of units that will be sold at a given price.

answer

Demand Curve

question

Economists emphasize three key factors that influence demand for a product:

answer

-Consumer tastes -Price and availability of similar products -Consumer income

question

As price is lowered, the quantity sold (demanded) increases, this is an example of a movement along a ______ _____, and it assumes that other factors (consumer tastes, price and availability of substitutes, and consumers' incomes) remain unchanged

answer

Demand Curve

question

______ ______ of demand, or the percentage change in quantity demanded relative to a percentage change in price.

answer

Price Elasticity

question

Price Elasticity of Demand =

answer

Percentage change in QD / Percentage change in price

question

______ _____ exists when a 1 percent decrease in price produces more than a 1 percent increase in quantity demanded, thereby actually increasing total revenue.

answer

Elastic Demand -This results in a price elasticity that is greater than 1 with elastic demand. In other words, a product with elastic demand is one in which a slight decrease in price results in a relatively large increase in demand or units sold. The reverse is also true; with elastic demand, a slight increase in price results in a relatively large decrease in demand.

question

While _______ may talk about "demand curves", ______ _____ are more likely to speak in terms of "revenue generated".

answer

economists, marketing executives

question

Demand curves lead directly to an essential revenue concept critical to pricing decisions: _______ _______, or the total money received from the sale of a product.

answer

Total Revenue

question

Total Revenue = the _____ ______ times the _______ ______

answer

unit price, quantity sold

question

Many firms go bankrupt because their costs get out of control, causing their _____ _____ -the sum of their fixed costs and variable costs - to exceed their total revenues over an extended period of time

answer

Total Costs

question

______-______ ______ is a technique that analyzes the relationship between total revenue and total cost to determine the profitability at various levels of output

answer

Break-Even Analysis -The break-even point (BEP) is the quantity at which total revenue and total cost are equal. Profit then comes from all units sold beyond the BEP.

question

Break-Even Point =

answer

Fixed Cost / Unit Price - Unit Variable Cost

question

_____ _____ is the sum of the expenses of the firm that are stable and do not change with the quantity of a product that is produced and sold

answer

Fixed Cost

question

_______ ______ is the sum of the expenses of the firm that vary directly with the quantity of a product that is produced and sold. For example, as the quantity sold doubles, the variable cost doubles.

answer

Variable Cost

question

A graphic presentation of the break-even analysis is called a _____-_____ ______

answer

break-even chart

question

_____ _____ involve specifying the role of price in an organization's marketing and strategic plans.

answer

Pricing Objectives -To the extent possible, these pricing objectives are carried to lower levels in the organization, such as in setting objectives for marketing managers responsible for an individual brand

question

Three different objectives relate to a firm's profit, which is often measured in terms of ROI or ROA. These objectives have different implications for pricing strategy. These are:

answer

-Managing for long-run profits -Maximizing current profit -Target return

question

What is Managing for Long-Run Profits?

answer

Where companies give up immediate profit by developing quality products to penetrate competitive markets over the long term

question

What is Maximizing Current Profit?

answer

Common in many firms because the targets can be set and performance measured quickly.

question

What is a Target Return?

answer

An objective occurs when a firm sets a profit goal, usually determined by its board of directors.

question

The ratio of a firm's sales revenues or unit sales to those of the industry is known as a _____ ______

answer

Market Share

question

The quantity produced or sold, usually as a pricing objective is known as ______ _______

answer

Unit Volume

question

Factors that limit the range of prices a firm may set are _______ _______

answer

pricing constraints -Consumer demand for the product clearly affects the price that can be charged. Other constraints on price vary from factors within the organization to competitive factors outside the organization

question

Four pricing practices that have received special scrutiny:

answer

-Price Fixing -Price Discrimination -Deceptive Pricing -Predatory Pricing

question

A conspiracy among firms to set prices for a product is termed _____ _____

answer

Price Fixing -Illegal under the Sherman Act

question

The practice of charging different prices to different buyers for goods of like grade and quality is known as ______ _______

answer

Price Discrimination -The Clayton Act as amended by the Robinson-Patman Act prohibits this

question

Price deals that mislead consumers fall into the category of _______ ______

answer

Deceptive Pricing -Outlawed by the Federal Trade Commission

question

______ _______ is the practice of charging a very low price for a product with the intent of driving competitors out of business. Once competitors have been driven out, the firm raises its prices.

answer

Predatory Pricing

question

The ______ ______ must be high enough to cover the cost of providing the product or service and meet the objectives of the company.

answer

final price

question

Three generalized steps to setting a Final Price

answer

-Select an approximate price level -Set the list or quoted price -Make special adjustments to the list or quoted price

question

A _____-______ policy, also called ______ ______, is setting one price for all buyers of a product or service

answer

one-price, fixed pricing

question

A _______-_______ policy involves setting different prices for products and services depending on individual buyers and purchase situations in light of demand, cost, and competitive factors.

answer

flexible-price

question

______ are reductions from list price that a seller gives a buyer as a reward for some activity of the buyer that is favorable to the seller.

answer

Discounts

question

_______ Discounts are used to encourage customers to buy larger quantities of a product, firms at all levels in the channel of distribution offer quantity discounts, which are reductions in unit costs for a larger order

answer

Quantity

question

______ Discounts are used to encourage buyers to stock inventory earlier than their normal demand would require, manufacturers often use these discounts.

answer

Seasonal

question

______ (______) Discounts are used to reward wholesalers and retailers for marketing functions they will perform in the future, a manufacturer often gives these discounts.

answer

Trade (functional) -These reductions off the list or base price are offered to resellers in the channel of distribution on the basis of (1) where they are in the channel and (2) the marketing activities they are expected to perform in the future.

question

_______ Discounts are used to encourage retailers to pay their bills quickly.

answer

Cash -Typically expressed as a percentage off the list price

question

______ - like discounts -are reductions from list or quoted prices to buyers for performing some activity

answer

Allowances

question

_____-______ Allowances are price reductions given when a used product is part of the payment on a new product

answer

Trade-In

question

________ Allowances are where sellers in the channel of distribution can qualify for promotional allowances for undertaking certain advertising or selling activities to promote a product.

answer

Promotional

question

Value is....

answer

the ratio of perceived benefits to price

question

What circumstances in pricing a new product might support skimming or penetration pricing?

answer

Skimming pricing is an effective strategy when: (1) enough prospective customers are willing to buy the product immediately at the high initial price to make these sales profitable; (2) the high initial price will not attract competitors; (3) lowering the price has only a minor effect on increasing the sales volume and reducing the unit costs; and (4) customers interpret the high price as signifying high quality. These four conditions are most likely to exist when the new product is protected by patents or copyrights or its uniqueness is understood and valued by customers. The conditions favoring penetration pricing are the reverse of those supporting skimming pricing: (1) many segments of the market are price sensitive; (2) a low initial price discourages competitors from entering the market; and (3) unit production and marketing costs fall dramatically as production volumes increase. A firm using penetration pricing may (1) maintain the initial price for a time to gain profit lost from its low introductory level or (2) lower the price further, counting on the new volume to generate the necessary profit.

question

What three key factors are necessary when estimating consumer demand?

answer

Consumer tastes, price and availability of similar products, and consumer income

question

Price elasticity of demand is...

answer

the percentage change in the quantity demanded relative to a percentage change in price

question

What is the difference between fixed costs and variable costs?

answer

Fixed cost is the sum of the expenses of the firm that are stable and do not change with the quantity of a product that is produced and sold. Variable cost is the sum of the expenses of the firm that vary directly with the quantity of a product that is produced and sold.

question

What is a break-even point?

answer

A break-even point (BEP) is the quantity at which total revenue and total cost are equal

question

What is the difference between pricing objectives and pricing constraints?

answer

Pricing objectives specify the role of price in an organization's marketing and strategic plans. Pricing constraints are factors that limit the range of prices a firm may set.

question

Explain what bait and switch is and why it is an example of deceptive pricing

answer

Bait and switch is the practice of offering a very low price on a product (the bait) to attract customers to a store. Once in the store, the customer is persuaded to purchase a higher-priced item (the switch) using a variety of tricks, including (1) degrading the promoted item and (2) not having the promised item in stock or refusing to take orders for it

question

What are the three steps in setting a final price?

answer

They are: (1) select an appropriate price level; (2) set the list or quoted price; and (3) make special adjustments to the list or quoted price

question

What is the purpose of (A) quantity discounts and (B) promotional allowances?

answer

Quantity discounts are used to encourage customers to buy larger quantities of a product. Promotional allowances are used to encourage sellers in the channel of distribution to undertake certain advertising or selling activities to promote a product

Marketing Chapter 11 2 – Flashcards

Unlock all answers in this set

Haven't found what you were looking for?

Search for samples, answers to your questions and flashcards