pricing strategy - topic 4 - Custom Scholars
Home » Flash Cards » pricing strategy – topic 4

# pricing strategy – topic 4

question
internal factors
marketing objectives, marketing mix strategies, costs, organizational considerations
question
external factors
competition, economy, resellers, government, demand
question
cost
cost sets floor for price; marketers dont usually set price close to, at, or below cost for obvious reasons
question
captive product pricing
pricing products that must be used with the main product; selling products to customers at a very low price but they need to also buy a product at a high price; ex: selling printer super cheap but selling ink for lots of money
question
variable costs
costs that vary with the quantity of output produced and sold
question
fixed costs
FC = Q (P - UVC)

costs that remain constant as output changes; including lease and rental payments, insurance and interest payments
question
breakeven volume
Q =FC/(P-UVC)

if you produce and sell:
more than BE volume = profit

less = loss

exactly = 0 (breakeven point)
question
FC
fixed cost
question
P
price
question
UVC
unit variable cost
question
TR = TC
total revenue = total cost
question
Q
break even volume
question
TVC
total variable cost
question
quantity demanded
price affects quantity demanded

*usually higher prices result in lower quantity demanded

*sometimes higher prices lead to higher quantity demanded
- luxury products, status, price as a proxy for quality
question
which demand curve has a more elastic demand?
more flat line instead of steep down line
question
perfectly inelastic demand
the case where the quantity demanded is completely unresponsive to price and the price elasticity of demand equals zero (straight vertical line, more vertical than horizontal)
question
perfectly elastic demand
the case where the quantity demanded is infinitely responsive to price and the price elasticity of demand equals infinity (straight or more horizontal than vertical)
question
elastic
value will almost always be a negative number; E < -1

total revenue after price decrease is larger than the original total

P and Q moving in opposite directions
question
elastic math
if E = -3; for every 1% change in price, the quantity demanded will change by 3% (or whatever E is absolute value) in the opposite direction

ex: P increases by 1% --> Q will decrease by 3% (sales revenue will decrease - moves in same direction as larger of the percentages)

ex: P decreases by 2% → Q will increase by 6% (3 times as much in the opposite direction)
question
inelastic
value will almost always be a negative number; when E > -1

total revenue after a price decrease is smaller than the original total revenue
question
inelastic math
if E = -0.5; for every 1% change in price, the quantity demanded will change by -0.5% in the opposite direction

ex: P increases by 1% --> Q will
decrease by .05% (sales revenue will increase)

ex: P decreases by 10% --> Q will increase by 5%
question
sales revenue
SR = P * Q
question
what influences price sensitivity
Buyers are more insensitive to price (ex: demand becomes more inelastic) when:
Lack of substitutes
A small expenditure compared to total income, a small % of total cost or used with previously purchased goods
Price signals quality
When products cannot be stored in large quantities for a long time
Then the demand becomes inelastic
question
Target profit pricing
a strategy that tells the management the total units to be sold to achieve the targeted profit for a particular period. Under this strategy, after considering total costs and profit targets, the management decides on the total production and sales for a particular period
question
Everything else being the same, when the unit variable cost increases the break-even volume:
increases
question
Finding new usage times for their existing products is a way by which firms can:
increase primary demand
question
Fixed costs will always remain fixed no matter the number of units produced and sold
false
question
Liquidating slow moving inventory could be one reason for selling products at or below cost
true
question
It is not possible to have market share greater than 100%
true
question
Break even volume can be calculated using the formula:
Fixed costs / (price - unit variable cost)
question
According to the asynchronous lecture, the gap between the numbers of people in the US aged 5 and under, and those 65 and over is decreasing
false
question
break even volume can be calculated using the formula
fixed costs / (price - unit variable cost)
question
everything else being the same, a product category that has no alternativ tends to have more elastic demand
false
question
with a 6% decrease in price there was an increase in revenue (% not provided), demand is
elastic
question
the price of a product was increased by \$10,000 and the quantity demanded fell by 10 tons; the demand is
cannot be determined from the given info
question
the price of some product category was increased by 3% and the quantity demanded for this product category fell by 2%; the demand is
inelastic
question
when the price is increased and the sales revenue increases, the demand can be said to be
inelastic
question
the quantity demanded fell by 4% when the price of the product was raised by 7%; the demand for the product is
inelastic
question
when the price is decreased and the sales revenue decreases, the demand can be said to be
inelastic
question
the price of a product was increased by a certain percentage and the quantity demanded fell by a larger percentage; the demand is
elastic
question
if with a large percentage increase in price there was a small decrease in revenue we can say that demand is
elastic
question
the price of vibranium was decreased by 7% and the revenue increased by 4%; the demand is
elastic
question
if with a small percentage decrease in price there was a large percentage increase in quantity demanded, we can say that demand is
elastic
question
when the price is increased and the sales revenue decreases, the demand can be said to be
elastic
question
ordinarily when price increases, the quantity demanded decreases
true
question
wanting to eliminate weaker competitors could be one reason for selling products at or below cost
true
question
cost plus pricing
adding a standard markup to the cost of the product; ignores demand and competition, perceived as fair and is simple to implement
question
sku
stock keeping unit
question
perceived value pricing
what the customer is willing to pay; price not on cost but what the consumers think it is worth
question
going rate pricing
Setting price based largely on following competitors' prices rather than on company costs or demand
question
functional discount/promotional allowance
a discount to wholesalers and retailers for performing channel functions - by manufacturer to retailer
question
seasonal discounts
discounts offered to encourage buyers to buy earlier than present demand requires; airlines, movie tickets, hotel rates
question
quantity discounts
discounts offered to encourage customers to buy in larger amounts
question
early payment discounts
Discounts offered by manufacturers to encourage customers to pay for their goods before the agreed time
question
2/10, net 30
means the buyer can take a 2 percent discount off the face value of the invoice if the invoice is paid within 10 days, but they have up to 30 days to pay
question
ROI
return on investment (per annually, per year p.a.)
question
skimming pricing
a new product pricing strategy that aims to maximize profitability by offering new products at a premium price
- product has high quality, enough demand to justify its production, high barriers to entry for competition
question
the payment term 4/12 net 36 means that the customer is required to pay the seller within
36 days
question
if the payment terms are 3/25 net 45 then the customer should compare the payment discount with the earning potential of holding on to their money for
20 extra days
question
a commodity is defined as a product category that is required for everyday life
false
question
perceived value pricing is where marketers charge an unreasonably high price
false
question
a disadvantage of cost plus pricing is that it may promote price wars
false
question
if with a 6% decrease in price there was an increase in revenue (% not provided) demand is
elastic
question
the price of a product was increased from \$10,000 by \$100 and the quantity demanded fell from 10 tons to 5 tons. the demand is
elastic
question
the price of some product category was raised by 3% and the quantity demanded for this product category fell by 5%. the demand is
elastic
question
the quantity demanded fell by 4% when the price of the product was raised by 7%. the demand for the product is
inelastic
question
the price of vibranium was decreased by 7% and the revenue increased by 4%. the demand is
elastic
question
when the price is increased and the sales revenue decreases, the demand can be said to be
elastic
1 of 68
question
internal factors
marketing objectives, marketing mix strategies, costs, organizational considerations
question
external factors
competition, economy, resellers, government, demand
question
cost
cost sets floor for price; marketers dont usually set price close to, at, or below cost for obvious reasons
question
captive product pricing
pricing products that must be used with the main product; selling products to customers at a very low price but they need to also buy a product at a high price; ex: selling printer super cheap but selling ink for lots of money
question
variable costs
costs that vary with the quantity of output produced and sold
question
fixed costs
FC = Q (P - UVC)

costs that remain constant as output changes; including lease and rental payments, insurance and interest payments
question
breakeven volume
Q =FC/(P-UVC)

if you produce and sell:
more than BE volume = profit

less = loss

exactly = 0 (breakeven point)
question
FC
fixed cost
question
P
price
question
UVC
unit variable cost
question
TR = TC
total revenue = total cost
question
Q
break even volume
question
TVC
total variable cost
question
quantity demanded
price affects quantity demanded

*usually higher prices result in lower quantity demanded

*sometimes higher prices lead to higher quantity demanded
- luxury products, status, price as a proxy for quality
question
which demand curve has a more elastic demand?
more flat line instead of steep down line
question
perfectly inelastic demand
the case where the quantity demanded is completely unresponsive to price and the price elasticity of demand equals zero (straight vertical line, more vertical than horizontal)
question
perfectly elastic demand
the case where the quantity demanded is infinitely responsive to price and the price elasticity of demand equals infinity (straight or more horizontal than vertical)
question
elastic
value will almost always be a negative number; E < -1

total revenue after price decrease is larger than the original total

P and Q moving in opposite directions
question
elastic math
if E = -3; for every 1% change in price, the quantity demanded will change by 3% (or whatever E is absolute value) in the opposite direction

ex: P increases by 1% --> Q will decrease by 3% (sales revenue will decrease - moves in same direction as larger of the percentages)

ex: P decreases by 2% → Q will increase by 6% (3 times as much in the opposite direction)
question
inelastic
value will almost always be a negative number; when E > -1

total revenue after a price decrease is smaller than the original total revenue
question
inelastic math
if E = -0.5; for every 1% change in price, the quantity demanded will change by -0.5% in the opposite direction

ex: P increases by 1% --> Q will
decrease by .05% (sales revenue will increase)

ex: P decreases by 10% --> Q will increase by 5%
question
sales revenue
SR = P * Q
question
what influences price sensitivity
Buyers are more insensitive to price (ex: demand becomes more inelastic) when:
Lack of substitutes
A small expenditure compared to total income, a small % of total cost or used with previously purchased goods
Price signals quality
When products cannot be stored in large quantities for a long time
Then the demand becomes inelastic
question
Target profit pricing
a strategy that tells the management the total units to be sold to achieve the targeted profit for a particular period. Under this strategy, after considering total costs and profit targets, the management decides on the total production and sales for a particular period
question
Everything else being the same, when the unit variable cost increases the break-even volume:
increases
question
Finding new usage times for their existing products is a way by which firms can:
increase primary demand
question
Fixed costs will always remain fixed no matter the number of units produced and sold
false
question
Liquidating slow moving inventory could be one reason for selling products at or below cost
true
question
It is not possible to have market share greater than 100%
true
question
Break even volume can be calculated using the formula:
Fixed costs / (price - unit variable cost)
question
According to the asynchronous lecture, the gap between the numbers of people in the US aged 5 and under, and those 65 and over is decreasing
false
question
break even volume can be calculated using the formula
fixed costs / (price - unit variable cost)
question
everything else being the same, a product category that has no alternativ tends to have more elastic demand
false
question
with a 6% decrease in price there was an increase in revenue (% not provided), demand is
elastic
question
the price of a product was increased by \$10,000 and the quantity demanded fell by 10 tons; the demand is
cannot be determined from the given info
question
the price of some product category was increased by 3% and the quantity demanded for this product category fell by 2%; the demand is
inelastic
question
when the price is increased and the sales revenue increases, the demand can be said to be
inelastic
question
the quantity demanded fell by 4% when the price of the product was raised by 7%; the demand for the product is
inelastic
question
when the price is decreased and the sales revenue decreases, the demand can be said to be
inelastic
question
the price of a product was increased by a certain percentage and the quantity demanded fell by a larger percentage; the demand is
elastic
question
if with a large percentage increase in price there was a small decrease in revenue we can say that demand is
elastic
question
the price of vibranium was decreased by 7% and the revenue increased by 4%; the demand is
elastic
question
if with a small percentage decrease in price there was a large percentage increase in quantity demanded, we can say that demand is
elastic
question
when the price is increased and the sales revenue decreases, the demand can be said to be
elastic
question
ordinarily when price increases, the quantity demanded decreases
true
question
wanting to eliminate weaker competitors could be one reason for selling products at or below cost
true
question
cost plus pricing
adding a standard markup to the cost of the product; ignores demand and competition, perceived as fair and is simple to implement
question
sku
stock keeping unit
question
perceived value pricing
what the customer is willing to pay; price not on cost but what the consumers think it is worth
question
going rate pricing
Setting price based largely on following competitors' prices rather than on company costs or demand
question
functional discount/promotional allowance
a discount to wholesalers and retailers for performing channel functions - by manufacturer to retailer
question
seasonal discounts
discounts offered to encourage buyers to buy earlier than present demand requires; airlines, movie tickets, hotel rates
question
quantity discounts
discounts offered to encourage customers to buy in larger amounts
question
early payment discounts
Discounts offered by manufacturers to encourage customers to pay for their goods before the agreed time
question
2/10, net 30
means the buyer can take a 2 percent discount off the face value of the invoice if the invoice is paid within 10 days, but they have up to 30 days to pay
question
ROI
return on investment (per annually, per year p.a.)
question
skimming pricing
a new product pricing strategy that aims to maximize profitability by offering new products at a premium price
- product has high quality, enough demand to justify its production, high barriers to entry for competition
question
the payment term 4/12 net 36 means that the customer is required to pay the seller within
36 days
question
if the payment terms are 3/25 net 45 then the customer should compare the payment discount with the earning potential of holding on to their money for
20 extra days
question
a commodity is defined as a product category that is required for everyday life
false
question
perceived value pricing is where marketers charge an unreasonably high price
false
question
a disadvantage of cost plus pricing is that it may promote price wars
false
question
if with a 6% decrease in price there was an increase in revenue (% not provided) demand is
elastic
question
the price of a product was increased from \$10,000 by \$100 and the quantity demanded fell from 10 tons to 5 tons. the demand is
elastic
question
the price of some product category was raised by 3% and the quantity demanded for this product category fell by 5%. the demand is
elastic
question
the quantity demanded fell by 4% when the price of the product was raised by 7%. the demand for the product is
inelastic
question
the price of vibranium was decreased by 7% and the revenue increased by 4%. the demand is
elastic
question
when the price is increased and the sales revenue decreases, the demand can be said to be
elastic

## Calculate the price of your order

550 words
We'll send you the first draft for approval by September 11, 2018 at 10:52 AM
Total price:
\$26
The price is based on these factors:
Number of pages
Urgency
Basic features
• Free title page and bibliography
• Unlimited revisions
• Plagiarism-free guarantee
• Money-back guarantee
On-demand options
• Writer’s samples
• Part-by-part delivery
• Overnight delivery
• Copies of used sources
Paper format
• 275 words per page
• 12 pt Arial/Times New Roman
• Double line spacing
• Any citation style (APA, MLA, Chicago/Turabian, Harvard)

## Our guarantees

Delivering a high-quality product at a reasonable price is not enough anymore.
That’s why we have developed 5 beneficial guarantees that will make your experience with our service enjoyable, easy, and safe.

### Money-back guarantee

You have to be 100% sure of the quality of your product to give a money-back guarantee. This describes us perfectly. Make sure that this guarantee is totally transparent.

### Zero-plagiarism guarantee

Each paper is composed from scratch, according to your instructions. It is then checked by our plagiarism-detection software. There is no gap where plagiarism could squeeze in.

### Free-revision policy

Thanks to our free revisions, there is no way for you to be unsatisfied. We will work on your paper until you are completely happy with the result.