Demand - based pricing
A price-setting method based on estimated of demand at different prices.
Law of Demand Curve
as price goes up, quantity demanded goes down. steep line = inelastic demandestimating price elasticity of demand = %change in sales / %change in price
Cross-elasticity of demand
When changes in the price of one product affect the demand for another item.
The cost of production that are tied to and vary depending on the number of units produced.
Costs of production that do not change with the number of units produced.
The total of the fixed costs and the variable costs for a set number of units produced.
Point at which the total revenue and total costs are equal and beyond which the company makes a profit. the firm will suffer a loss below that point.
Contribution per unit
The contribution from each sale to fixed costs.
A method that uses cost and demand to identify the price that will maximize profits.
Steps in Price Planning (DEDECD)
1 - Develop Pricing Objectives2 - Estimate Demand3 - Determine costs of goods sold4 - Evaluate the pricing environment5 - Chose a price Implementation strategy6 - Develop Pricing Tactics
Increase in total cos that results from producing one additional unit of a product.
The quantity of a product customers are going to buy.
A method of setting prices in which the seller totals all the costs for the product and then adds the amount to arrive at the selling price.
Yield Management Pricing
A practice of charging different prices to different customers in order to manage capacity while maximizing revenues.
Pricing strategy where one firm sets it's price and other firm's in the industry follow with the same or very similar prices.
Value Pricing or everyday low pricing (EDLP)
A pricing strategy where a firm sets prices that provide ultimate value to customers.
Pricing a new product low for a limited period of time in order to lower the risk for a customer.
A very high premium price a firm charges for a new products into stage.
Pricing strategy where a firm introduces a product at a very low price to encourage more customers to purchase it.
Demand in which changes in price have large effects on the amount demanded.
Products that have a high price and that appeal to status-conscious customers.
Selling two or more goods or services as a single package for one price.
The practice of setting a limited number of different specific prices, called price points, for items in a product line.
An illegal marketing practice where an advertising price special is used as bait to get customers into the store with the intention of switching them to a higher product.
Loss Leader Pricing
A retail or manufacturer pricing policy of setting prices very low or even below costs on one product or product line to attract customers into a store.
Illegal pricing strategy in which a company sets a very low price for the purpose of driving competitors out of business.
A pricing strategy where the price can easily be adjusted to meet changes in the marketplace.