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C712 Pricing
| Question | Answer |
|---|---|
| Price | is the exchange value of a good or service; in other words, it represents whatever that product can be exchanged for in the marketplace |
| Robinson-Patman act -1936 | typifies Depression-era legislation. Known as the Anti–A&P Act, it was inspired by price competition triggered by the rise of grocery store chains; it is said that the original draft was suggested by the U.S. Wholesale Grocers Association |
| Unfair trade laws | require sellers to maintain minimum prices for comparable merchandise. Enacted in the 1930s, these laws were intended to protect small specialty shops, such as dairy stores, from so-called loss-leader pricing tactics |
| Fair Trade laws | allow manufacturers to stipulate minimum retail prices for their products and to require dealers to sign contracts agreeing to abide by these prices. |
| Pricing objectives classification | 4 major groups namely: profitability, volume, meeting competition, prestige |
| Profit formula | Profits= Revenue- Expenses |
| Revenue formula | Total Revenue= Price x Quantity sold |
| Marginal analysis | It is the examination of the increase in revenue when price is increased to a certain point beyond which the revenues will decline as quantity of goods sold will reduce. |
| Profit maximization | point at which the addition to total revenue is just balanced by the increase in total cost. |
| Target-return maximization | short-run or long-run goals usually stated as percentages of sales or investment. |
| market-share objective | the goal of cutting prices to get market share. |
| Value pricing | emphasizes the benefits a product provides in comparison to the price and quality levels of competing offerings |
| Prestige objective | relatively high price to develop and maintain an image of quality and exclusiveness that appeals to status-conscious consumers. |
| Pricing objectives of non-profit organizations | Profit maximization; cost recovery; market incentives; market supression |
| Customary prices | retail prices consumers expect as a result of tradition and social habit. Candy makers have attempted to maintain traditional price levels by greatly reducing overall product size. |
| Demand | refers to a schedule of the amounts of a firm’s product that consumers will purchase at different prices during a specified time period |
| Supply | refers to a schedule of the amounts of a good or service that will be offered for sale at different prices during a specified period |
| Four types of market structures | Pure competition, Monopolistic competition, Oligopoly, Monopoly |
| Pure Competition | is a market structure with so many buyers and sellers that no single participant can significantly influence price. |
| Monopolistic competition | typifies most retailing and features large numbers of buyers and sellers. These diverse parties exchange heterogeneous, relatively well-differentiated products, giving marketers some control over prices. |
| Oligopoly | There are few sellers. Pricing decisions by each seller are likely to affect the market, but no single seller controls it. High start-up costs form significant barriers to entry for new competitors. |
| Monopoly | is a market structure in which only one seller of a product exists and for which there are no close substitutes. Antitrust legislation has nearly eliminated all but temporary monopolies, such as those created through patent protection |
| Variable costs | such as raw materials and labor costs, change with the level of production. |
| Fixed costs | such as lease payments or insurance costs, remain stable at any production level within a certain range. |
| Average total costs | are calculated by dividing the sum of the variable and fixed costs by the number of units produced. |
| Marginal costs | is the change in total cost that results from producing an additional unit of output. |
| Elasticity | is the measure of the responsiveness of purchasers and suppliers to price changes. |
| Price elasticity of demand (or elasticity of demand) | is the percentage change in the quantity of a good or service demanded divided by the percentage change in its price. |
| Skimming pricing or Cost-plus pricing | Pricing strategy involving the use of a high price relative to competitive offerings. |
| Step out | Pricing practice in which one firm raises prices and then waits to see if others follow suit. |
| Penetration Pricing or Market-minus | Pricing strategy involving the use of a relatively low entry price compared with competitive offerings, based on the theory that this initial low price will help secure market acceptance. |
| Everyday low pricing (EDLP) | Pricing strategy of continuously offering low prices rather than relying on short-term price cuts such as cents-off coupons, rebates, and special sales. |
| Competitive Pricing strategy | Pricing strategy designed to deemphasize price as a competitive variable by pricing a good or service at the level of comparable offerings. |
| Opening price point | An opening price below that of the competition, usually on a high-quality, private-label item. |
Created by:
mkale
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