Chapter 10: Pricing

question

Price

answer

the amount of money charged for a product or service, or the sum of the values that customers exchange for the benefits of having or using the product or service

question

Customer value-based pricing

answer

setting price based on buyers’ perceptions of value rather than on the seller’s cost

question

Good-value pricing

answer

offering just the right combination of quality and good service at a fair price.

question

Value-added pricing

answer

attaching value-added features and services to differentiate a company’s offers and charging higher prices

question

Cost-based pricing

answer

setting prices based on the costs of producing, distributing, and selling the product plus a fair rate of return for effort and risk

question

Fixed costs (overhead)

answer

costs that do not vary with production or sales level

question

Variable costs

answer

costs that vary directly with the level of production

question

Total costs

answer

the sum of the fixed and variable costs for any given level of production

question

Experience curve (learning curve)

answer

the drop in the average per-unit production cost that comes with accumulated production experience

question

Cost-plus pricing (markup pricing)

answer

adding a standard markup to the cost of the product

question

Break-even pricing (target return pricing)

answer

setting price to break even on the costs of making and marketing a product or setting price to make a target return

question

Competition-based pricing

answer

setting prices based on competitors’ strategies, prices, costs, and market offerings

question

Target costing

answer

pricing that starts with an ideal selling price, then targets costs that will ensure that the price is met

question

Demand curve

answer

a curve that shows the number of units that market will buy in a given time period, at different prices that might be charged

question

Price elasticity

answer

a measure of the sensitivity of demand to changes in price

question

Dan Ariely & The fallacy of Supply and Demand

answer

Consumers purchase items based on value, quality or availability.

question

Imprinting

answer

a consumer’s first experience with a given price.

question

Anchor

answer

the reference point a consumer uses to compare current and future offerings.

question

Arbitrary Coherence

answer

although initial prices are arbitrary, once those prices are established in our minds they will shape not only present prices but also future prices.

question

Everyday low pricing

answer

involves charging a constant everyday low price with few or no temporary price discounts

question

High-low pricing

answer

involves charging higher prices on an everyday basis but running frequent promotions to lower prices temporarily on selected items

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question

Price

answer

the amount of money charged for a product or service, or the sum of the values that customers exchange for the benefits of having or using the product or service

question

Customer value-based pricing

answer

setting price based on buyers’ perceptions of value rather than on the seller’s cost

question

Good-value pricing

answer

offering just the right combination of quality and good service at a fair price.

question

Value-added pricing

answer

attaching value-added features and services to differentiate a company’s offers and charging higher prices

question

Cost-based pricing

answer

setting prices based on the costs of producing, distributing, and selling the product plus a fair rate of return for effort and risk

question

Fixed costs (overhead)

answer

costs that do not vary with production or sales level

question

Variable costs

answer

costs that vary directly with the level of production

question

Total costs

answer

the sum of the fixed and variable costs for any given level of production

question

Experience curve (learning curve)

answer

the drop in the average per-unit production cost that comes with accumulated production experience

question

Cost-plus pricing (markup pricing)

answer

adding a standard markup to the cost of the product

question

Break-even pricing (target return pricing)

answer

setting price to break even on the costs of making and marketing a product or setting price to make a target return

question

Competition-based pricing

answer

setting prices based on competitors’ strategies, prices, costs, and market offerings

question

Target costing

answer

pricing that starts with an ideal selling price, then targets costs that will ensure that the price is met

question

Demand curve

answer

a curve that shows the number of units that market will buy in a given time period, at different prices that might be charged

question

Price elasticity

answer

a measure of the sensitivity of demand to changes in price

question

Dan Ariely & The fallacy of Supply and Demand

answer

Consumers purchase items based on value, quality or availability.

question

Imprinting

answer

a consumer’s first experience with a given price.

question

Anchor

answer

the reference point a consumer uses to compare current and future offerings.

question

Arbitrary Coherence

answer

although initial prices are arbitrary, once those prices are established in our minds they will shape not only present prices but also future prices.

question

Everyday low pricing

answer

involves charging a constant everyday low price with few or no temporary price discounts

question

High-low pricing

answer

involves charging higher prices on an everyday basis but running frequent promotions to lower prices temporarily on selected items

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Chapter 10: Pricing

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