Marketing DSM Chapter 10

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break-even point
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the point at which a firm doesn’t lose any money but doesn’t make any profit
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trade discounts
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discounts off list price of products to members of the channel of distribution who perform various marketing functions
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quantity discounts
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pricing tactic of charging reduced prices for purchases of larger quantities of a product
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cash discount
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offered to entice a customer to pay a bill quicly
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seasonal discount
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a price reduction offered only during certain times of the year
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penetration pricing
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the pricing strategy in which a firm introduces a new product at a very low price to encourage more customers to purchase it
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trail pricing
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occurs when a new product is priced low for a limited amount of time in order to lower the risk for the customer
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captive pricing
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pricing tactic for two items that must be used together: one is priced much lower, and the firm makes its profit on the other, high-margin item essential to the operation of the first item
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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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cost-plus pricing
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a method of setting prices in which the seller totals all the costs for the product and then adds an amount to arrive at the selling price
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demand-based pricing
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price-setting method based on estimates of demand at different prices
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yield management pricing
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a practice of charging different prices to different customers in order to manage capacity while maximizing revenues
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value pricing or everyday low pricing (EDLP)
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pricing strategy in which a firm sets prices that provide ultimate value to customer
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loss-leader pricing
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the pricing policy of setting prices very low or even below cost to attract customers into a store
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surge pricing
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pricing strategy in which the price of a product is raised as demand for that product goes up and lowered as demand goes down
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predatory pricing
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an illegal pricing strategy in which a company sets a very low price for the purpose of driving competitors out of business
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dynamic pricing
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pricing strategy in which the price can easily be adjusted to meet changed in the marketplace
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bait-and-switch
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an illegal marketing practice -an advertised price special is used to get customers into the store with the the intention of switching them to a higher-priced item
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unfair sales acts
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state laws that prohibit suppliers from selling products below cost to protect small businesses from larger companies
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price fixing
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the collaboration of two or more firms in setting prices, usually to keep prices high
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markup
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the amount added to the cost of a product to create the price at which a channel member will sell the product
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wholesaler margin
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the amount added to the cost of a product by a wholesaler
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retailer margin
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the margin added to the cost of a product by a retailer
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gross margin
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the markup amount added to the cost of product to cover the fixed costs of the retailer or wholesaler and leave an amount for a profit
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average fixed costs
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the fixed costs per unit produced
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internal reference price
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set price or price range in consumers’ minds to which they refer in evaluating a product’s price
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price lining
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the practice of setting a limited number of different specific prices, called price points, for items in a product line
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price fixing
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the collaboration of two or more firms in setting prices, usually to keep prices high
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demand curve
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used to show the quantity of a product that customers will buy in a given time period, at different prices that might be charged
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break-even analysis
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a method for determining the number of units that a firm must produce and sell at a given price to cover all its costs
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price elasticity of demand
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the percentage change in unit sales that results from a percentage change in price
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contribution per unit
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the difference between the price the firm charges for a product and the variable costs
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dynamic pricing
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a pricing strategy in which the price can easily be adjusted to meet changes in the marketplace
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online auctions
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method of e-commerce that allows shoppers to purchase a product through online bidding
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freemium strategy
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a business strategy in which a product in its most basic version is provided free of charge but the company charges money for upgraded versions of the product with more features, greater functionality, or greater capacity
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skimming price
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a very high, premium price that a firm charges for its new, highly desirable product
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elastic demand
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When customers are sensitive to changes in prices, and a change in price results in a substantial change in demand
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variable costs
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costs of production that are tied to and vary depending on the number of units produced
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profit
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When pricing strategies are determined by ___________ objectives, the focus is on a target level of profit growth or a desired net profit margin.
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customer satisfaction
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When pricing strategies are determined by ___________ objectives, a firm believes that profit will result from making customer satisfaction the primary objective
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image enhancement
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When pricing strategies are determined by ___________ objectives, the firm uses price to communicate product quality and image.
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sales or market share
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When pricing strategies are determined by ___________ objectives, the focus is on maximizing sales or increasing market share.

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