Marketing Chapter 10

question

price

answer

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

-only elect in marketing mix that produces revenue

-most flexible element

-quickly changeable

question

Set the ceiling for price of a product

answer

customer perceptions of the products value

question

Set the floor for a products price

answer

product costs

question

Company considerations in setting price

answer

-competitor strategies and prices

-overall marketing strategy and mix

-the nature of market and demand

question

General Pricing Strategies

answer

value, cost, and competitor based pricing

question

Customer value-based pricing

answer

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

question

Two types of value-based pricing

answer

good value pricing

value added pricing

question

Good-value pricing

answer

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

-everyday low pricing, high low pricing

question

everyday low pricing (EDLP)

answer

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

question

high low pricing

answer

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

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

-low cost producers

question

low cost producer

answer

companies with lower costs can set lower prices that result in smaller margins but greater sales and profits

question

Types of Costs

answer

fixed and variable(together is total)

question

Fixed costs (overhead costs)

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

Costs at different levels of production

answer

as production increases average cost per unit decreases

question

Costs as a Function of Production Experience

answer

average costs tend to decrease with accumulated production experience

-experience curve/learning curve

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

-unit cost

-markup price

-sellers more certain about costs than demands

-price competition minimized

-fair to both buyers and sellers

question

unit cost

answer

variable cost + (fixed cost/unit sales)

question

markup price

answer

unit cost/(1-desired return on sales)

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

break even volume

answer

fixed cost/(price-variable cost)

question

competition-based pricing

answer

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

-prices set according to relative value

question

internal factors affecting price

answer

Companies overall marketing strategy, objectives, and marketing mix as well as other organizational considerations

question

external factors affecting price

answer

Nature of market and demand and other environmental factors

question

setting price

answer

Must decide on overall marketing strategy before...

question

target costing

answer

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

question

Small companies

answer

prices set by top management

question

large companies

answer

prices handled by marketing or sales department

question

Industrial Markets

answer

salespeople may be allowed to negotiate with customers within certain price ranges

question

The market and demand

answer

consumer and industrial buyers balance the price of a product or service against the benefits of owning it

question

Four types of markets

answer

pure competition

monopolistic competition oligopolistic competition pure monopoly

question

pure competition

answer

-market consists of many buyers and sellers trading in uniform commodity

-no single buyer or seller has much effect of market price

-sellers in these markets do not spend much time on marketing strategy

-ex. wheat, copper, financial securities

question

monopolistic competition

answer

-market consists of many buyers and sellers trading over a range of prices rather than a single market price

-range of prices occurs because sellers differentiate offers to buyers

-sellers try to develop differentiated offer

question

oligopolistic competition

answer

-market consists of only a few large sellers

-ex. spectrum, at&t, dish network

-sellers are alert and responsive to competitors pricing strategies and market moves

-offer discounts, upgrades and lock in prices

question

pure monopoly

answer

-market dominated by one seller

-pricing handled differently in each case

-ex. postal service, power company, etc.

question

demand curve

answer

a curve that shows the number of units the 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

Inelastic

answer

-demand hardly changes with a small increase in price

-sellers raise price to produce more revenue

question

elastic

answer

-demand changes greatly with small increase in price

-sellers may consider lowering their prices to produce more total revenue

question

economic factors affecting pricing decision

answer

-boom/recession

-inflation

-interest rates

question

Factors in the external environment when setting prices

answer

-how will resellers react too various prices

-the government

-social concerns

question

Companies need to offer great value for the money

answer

no matter the situation

1 of 46

question

price

answer

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

-only elect in marketing mix that produces revenue

-most flexible element

-quickly changeable

question

Set the ceiling for price of a product

answer

customer perceptions of the products value

question

Set the floor for a products price

answer

product costs

question

Company considerations in setting price

answer

-competitor strategies and prices

-overall marketing strategy and mix

-the nature of market and demand

question

General Pricing Strategies

answer

value, cost, and competitor based pricing

question

Customer value-based pricing

answer

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

question

Two types of value-based pricing

answer

good value pricing

value added pricing

question

Good-value pricing

answer

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

-everyday low pricing, high low pricing

question

everyday low pricing (EDLP)

answer

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

question

high low pricing

answer

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

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

-low cost producers

question

low cost producer

answer

companies with lower costs can set lower prices that result in smaller margins but greater sales and profits

question

Types of Costs

answer

fixed and variable(together is total)

question

Fixed costs (overhead costs)

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

Costs at different levels of production

answer

as production increases average cost per unit decreases

question

Costs as a Function of Production Experience

answer

average costs tend to decrease with accumulated production experience

-experience curve/learning curve

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

-unit cost

-markup price

-sellers more certain about costs than demands

-price competition minimized

-fair to both buyers and sellers

question

unit cost

answer

variable cost + (fixed cost/unit sales)

question

markup price

answer

unit cost/(1-desired return on sales)

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

break even volume

answer

fixed cost/(price-variable cost)

question

competition-based pricing

answer

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

-prices set according to relative value

question

internal factors affecting price

answer

Companies overall marketing strategy, objectives, and marketing mix as well as other organizational considerations

question

external factors affecting price

answer

Nature of market and demand and other environmental factors

question

setting price

answer

Must decide on overall marketing strategy before...

question

target costing

answer

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

question

Small companies

answer

prices set by top management

question

large companies

answer

prices handled by marketing or sales department

question

Industrial Markets

answer

salespeople may be allowed to negotiate with customers within certain price ranges

question

The market and demand

answer

consumer and industrial buyers balance the price of a product or service against the benefits of owning it

question

Four types of markets

answer

pure competition

monopolistic competition oligopolistic competition pure monopoly

question

pure competition

answer

-market consists of many buyers and sellers trading in uniform commodity

-no single buyer or seller has much effect of market price

-sellers in these markets do not spend much time on marketing strategy

-ex. wheat, copper, financial securities

question

monopolistic competition

answer

-market consists of many buyers and sellers trading over a range of prices rather than a single market price

-range of prices occurs because sellers differentiate offers to buyers

-sellers try to develop differentiated offer

question

oligopolistic competition

answer

-market consists of only a few large sellers

-ex. spectrum, at&t, dish network

-sellers are alert and responsive to competitors pricing strategies and market moves

-offer discounts, upgrades and lock in prices

question

pure monopoly

answer

-market dominated by one seller

-pricing handled differently in each case

-ex. postal service, power company, etc.

question

demand curve

answer

a curve that shows the number of units the 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

Inelastic

answer

-demand hardly changes with a small increase in price

-sellers raise price to produce more revenue

question

elastic

answer

-demand changes greatly with small increase in price

-sellers may consider lowering their prices to produce more total revenue

question

economic factors affecting pricing decision

answer

-boom/recession

-inflation

-interest rates

question

Factors in the external environment when setting prices

answer

-how will resellers react too various prices

-the government

-social concerns

question

Companies need to offer great value for the money

answer

no matter the situation

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Marketing Chapter 10

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