Bitcoin
This is the most popular and fast-growing digital currency.
Price
The assignment of value, or the amount the consumer must exchange to receive the offering.
Price Planning Steps (6)
1.) Set pricing objectives
2.)Estimate Demand
3.) Determine costs
4.) Examine the pricing environment
5.) Choose a pricing strategy
6.) Develop Pricing tactics
Market Share
The percentage of a market (defined in terms of either sales units or revenue) accounted for by a specific firm, product line, or brands.
Prestige Products
Products that have a high price and that appeal to status-concious customers.
Price elasticity of demand
The percentage change in unit sales that results from a percentage change in price.
= Percentage change in quantity demanded /
% change in price
*** the more vertical the demand curve is the more Inelastic demand is. If the curve is perfectly vertical tha
Elastic demand
Demand in which changes in price have large effects on the amount demanded. This is where the customers are very sensitive to the price changes.
This is denoted by a price elasticity of demand greater than 1
Inelastic demand
Demand in which changes in price have little or no effect on the amount demanded. This is where the customers are not sensitive to changes in price.
This is denoted by a price elasticity of demand that is less than 1.
Price elasticity example (Elastic)
Pizza price goes from 10 to 9 dollars
= $1 change
=1/10 = 10% change in price
*** Demand also changes from 2,700 to 3,100 pizzas
3,100
-2,700
--------
400 pizzas
400/2,700 = 15% change in demand
SO
Price elasticity of demand =
% change in demand /
% chang
Cross elasticity of demand
When changes in the price of one product affect the demand for another item.
Variable costs
The costs of production ( raw and processed materials, parts and labor) that are tied to and vary, depending on the number of units produced.
Fixed costs
Costs of production that do not change with the number of units produced.
Field studies
These are ways that the researchers can identify what the demand curve will look like. They will vary the price of a product in different stores and measure how much is actually purchased at the different price levels.
Substitute goods affect on demand elasticity
These types of goods can cause a product to become more elastic. That is, a change in the products price will result in a change in demand as consumers move to by the substitute product.
EX: Coke and Pepsi - if one or the other prices goes up then people
Complement goods affect on demand elasticity
These types of goods are dependent upon each other. An increase in the price of one decreases the demand for the other.
EX: if the price of gasoline goes up its demand falls, consumers may drive less, and thus demand for tires will also fall.
Break even analysis
A method for determining the number of units that a firm must produce and sell at a give price to cover all of its costs.
Break-even point
The point at which the total revenue and total costs are equal and beyond which the company makes profit; below that point, the firm will suffer a loss.
Contribution per unit
The difference between the price the firm charges for a product and the variable costs.
Dynamic Pricing
A pricing strategy in which the price can easily be adjusted to meet changes in the marketplace.
The demand curve
This is primarily used to show the quantity of a product that customers will buy in a given time period, at different prices that might be charged.
Trade discounts
These are discounts off list price of products to members of the channel of distribution who perform various marketing functions.
Loss-leader pricing
This is the pricing policy of setting prices very low or even below cost to attract customers into a store.
Surge pricing
This is a pricing strategy in which the price of a product is raised as demand for that product goes up and lowered as demand goes down.
Predatory Pricing
This is an illegal pricing strategy in which a company sets a very low price for the purpose of driving competitors out of business.
Penetration pricing
This is a pricing strategy in which a firm introduces a new product at a very low price to encourage more customers to purchase it.
freemium strategy
This is the term used when a company provides a product in its most basic version free of charge but charges money for upgraded versions of the product.
Internal reference price
This is a set price or price range in consumers' minds to which they refer in evaluating a products price.
Loss leader pricing
This is the pricing policy where the firm will set prices very low or even below cost to attract customers into a store.
Examining the pricing environment
This is the step in the price planning process that involves looking at the economy, the competition, government regulation, consumer trends, and the international environment.
The set pricing objectives step
This is the step in the price planning process that involves looking at profit, sales, market share, competitive effect, customer satisfaction, and image enhancement.
The choose a price strategy step
This is the step in the price planning process that involves setting a price that is based on cost, demand, the competition, and customers' needs and addressing new-product pricing.
The develop pricing tactics step
This is the step in the price planning process that addresses pricing for individual products and multiple products, and includes distribution-based tactics and discounting for channel members.
Markup
This is an amount added to the cost of a product to create the price at which a channel member will sell the product.
Wholesaler margin
This is the amount that is added to the cost of a product by a wholesaler.
Retailer margin
This is the amount added to the cost of a product by a retailer.
Gross margin
This is the markup amount added to the cost of product to cover the fixed costs of the retailer or wholesaler and leave an amount for a profit.
Cost-plus pricing
This is a method of getting prices in which the seller totals all the costs for the product and then adds an amount to arrive at the selling price.
Demand-based pricing
A price setting method based on estimates of demand at different prices. Based on estimates of volume or quantity that it can sell in different markets at different prices.
Target costing
A process in which firms identify the quality and functionality needed to satisfy customers and what price they are willing to pay before the product is designed; the product is manufactured only if the firm can control costs to meet the required price.
T
yield management pricing
This is another type of demand based pricing. It is a practice of charging different prices to different customers in order to manage capacity while maximizing revenues.
Price leadership
This is a pricing strategy in which one firm first sets its price and other firms in the industry follow with the same or very similar prices.
Value pricing or everyday low pricing (EDLP)
A pricing strategy where a firm will set prices that provide ultimate value to its customers . (Walmart)
Skimming price
A very high, premium price that a firm charges for its new,highly desirable product.
Trial pricing
This is a pricing strategy where the firm prices a new product low for a limited time in order to lower the risk for a consumer.
Value pricing or everyday low pricing (EDLP)
A pricing strategy in which a firm sets prices that provide ultimate value to customers .
Price Bundling
Selling two or more goods or services as a single package for one price
Captive pricing
This is a pricing tactic for two items that must be used together; one item is priced very low, and the firm makes its profits on another high margin item essential to the operation of the first item.
For example low priced iPad or iPod and then the money
F.O.B origin pricing
A pricing tactic in which the cost of transporting the product from the factory to the customer's location is the responsibility of the customer.
F.O.B. delivered pricing
A pricing tactic in which the cost of loading and transporting the product to the customer is included in the selling price and is paid by the manufacturer.
Uniform delivered pricing
A pricing tactic in which a firm adds a standard shipping charge to the price for all customers regardless of location.
Freight absorption pricing
A pricing tactic in which the seller absorbs the total cost of transportation
Trade discounts
Discounts off list price of products to members of the channel of distribution who perform various marketing functions.
Quantity discounts
A pricing tactic of charging reduced prices for purchases of larger quantities of a product.
Cash discounts
A discount offered to a customer to entice them to pay their bill quickly.
Seasonal discounts
Price reductions offered only during certain times of the year.
Internet price discrimination
An internet pricing strategy that charges different prices to different customers for the same product.
Online auctions
E-commerce that allows shoppers to purchase products through online bidding.
Freemium
A business strategy in which a product in its most basic version is provided free of charge but the company charges money (the premium) for upgraded versions of the product with more features, greater functionality, or greater capacity.
Internal reference price
A set price or price range in consumers' minds that they refer to in evaluating a product's price.
Price lining
The practice of setting a limited number of different specific prices, called price points, for items in a product line.
Unfair sales acts
State laws that prohibit suppliers from selling products below cost to protect small businesses from larger competitions.
Price fixing
The collaboration of two or more firms in setting prices, usually to keep prices high.
For a skimming price to be successful what should be true?
There should be little chance that competitors can quickly enter the market.