Chapter 14 example #65362

that generates revenue

collaboration

competitive party

value

the lower the quantity consumers will buy

prestige pricing

elastic or inelastic

a specific brand of cereal

dynamic pricing

the greater the income elasticity for each product

hot dogs and hot dog buns

become more elastic

consumers make their purchases decisions based on perceived value

changes in the quantity being produced

profits are zero

dividing fixed costs by contribution per unit

price minus total variable cost

analyze the different elements contributing to their variable costs

price wars may occur

price is determined by the laws of supply and demand

the price against which buyers compare the actual selling price

price skimming

price discrimination

quickly build sales and market share

firms must consider the high costs associated with producing a small volume of product

1. competition 2. costs 3. company objectives 4. customers 5. channel memebers

a company objective that can be implemented by focusing on target profit pricing, maximizing profits, or target return pricing

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

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 maximized

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

a company objective based on the belief that increasing sales will help the firm more than will increasing profits

A competitor-based pricing method by which the firm deliberately prices a product above the prices set for competing products to capture those consumers who always shop for the best or for whom price does not matter

a company objective based on the premise that the firm should measure itself primarily against its competition

a firm's strategy of setting prices that are similar to those of major competitors

those that consumers purchase for status rather than fuctionality

Measures how changes in a price affect the quantity of the product demanded; specifically, the ratio of the percentage change in quantity demanded to the percentage change in price

Refers to the process of charging different prices for goods or services based on the type of customer, time of the day, week, or even season, and level of demand

The point at which the number of units sold generates just enough revenue to equal the total costs; at this point, profits are zero

Refers to the change in the quantity of a product demanded by consumers due to a change in their income

Refers to consumers' ability to substitute other products for the focal brand, thus increasing the price elasticity of demand for the focal brand

The percentage change in demand for product A that occurs in response to a percentage change in price of product B

Products whose demand curves are positively related, such that they rise or fall together; a percentage increase in demand for one results in a percentage increase in demand for the other

Products for which changes in demand are negatively related; that is, a percentage increase in the quantity demanded for product A results in a percentage decrease in the quantity demanded for product B

those costs, primarily labor and materials, that vary with production volume

those costs that remain essentially at the same level, regardless of any changes in the volume of production

the sum of the variable and fixed costs

equals the price less the variable cost per unit. Variable used to determine the break-even point in units

occurs when 2 or more firms compete primarily by lowering their prices

A firm's practice of setting a very low price for one or more of its products with the intent to drive its competition out of business; illegal under both the Sherman Antitrust Act and the Federal Trade Commission Act

Employs irregular but not necessarily illegal methods; generally, it legally circumvents authorized channels of distribution to sell goods at prices lower than those intended by the manufacturer

A strategy companies use to emphasize the continuity of their retail prices at a level somewhere between the regular, non-sale price and the deep-discount sale prices their competitors may offer

a pricing strategy that relies on the promotion of sales, during which prices are temporarily reduced to encourage purchases

The price against which buyers compare the actual selling price of the product and that facilitates their evaluation process

A growth strategy that employs the existing marketing mix and focuses the firm's efforts on existing customers

Refers to the drop in unit cost as the accumulated volume sold increases; as sales continue to grow, the costs continue to drop, allowing even further reductions in the price

loss leader pricing takes the tactic of leader pricing one step further by lowering the price below the store's cost

A deceptive practice of luring customers into the store with a very low advertised price on an item (the bait), only to aggressively pressure them into purchasing a higher-priced model (the switch) by disparaging the low-priced item, comparing it unfavorably with the higher-priced model, or professing an inadequate supply of the lower-priced item

the practice of colluding with other firms to control prices

Occurs when competitors that produce and sell competing products collude, or work together, to control prices, effectively taking price out of the decision process for consumers

occurs when parties at different levels of the same marketing channel (e.g., manufacturers and retailers) collude to control the prices passed on to consumers

• the price that manufacturers suggest retailers use to sell their merchandise