Price
The amount of money charged for a product or service, or the sum of the values that customers exchange for the benefits of having or using the product or service
Customer Value-based pricing
Setting price based on buyers' perceptions of value rather than on the seller's cost
Good Value pricing
Offering just the right combination of quality and good service at a fair price
Value-added Pricing
Attaching value-added features and services to differentiate a company's offers and charging higher prices
Cost-based pricing
Setting prices based on the costs for producing, distributing, and selling the product plus a fair rate of return for effort and risk
Fixed Costs (overhead)
Costs that do not vary with production or sales level
Variable costs
Costs that vary directly with the level of production
Total costs
The sum of the fixed and variable costs for any given level of production
Cost-plus pricing (markup pricing)
Adding a standard markup to the cost of the product
Break-even pricing (target return pricing)
Setting price to break even on the costs of marketing a product, or setting price to make a target return
Competition-based pricing
Setting prices based on competitors' strategies, prices, costs, and market offerings
Target Costing
Pricing that starts with an ideal setting price, the targets costs that will ensure that the price is met
Demand Curve
A curve that shows the number of units the market will buy in a given time period, at different prices that might be charged
Price Elasticity
A measure of the sensitivity of demand to changes in price
Market-skimming pricing
Setting a high price for a new product to skim maximum revenues layer by layer from the segments willing to pay the high price; the company makes fewer but more profitable sales
Market-penetration pricing
Setting a low price for a new product in order to attract a large number of buyers and a large market share
Product line pricing
Setting the price steps between various products in a product line based on cost differences between the products, customer evaluations of different features, and competitors' prices
Optional-product pricing
The pricing of optional or accessory products along with a main product
Captive-product pricing
Setting a price for products that must me used along with a main product, such as blades for a razor and games for a videogame console
By-product pricing
Setting a price for by-products in order to make the main product price more competitive
Product bundle pricing
Combining several products and offering the bundle at a reduced price
Discount
A straight reduction in price on purchases during a stated period of time or of larger quantities
Allowance
Promotional money paid by manufacturers to retailers in return for an agreement to feature the manufacturer's products in some way
Segmented Pricing
Selling a product or service at two or more prices, where the difference in price is not based on differences in costs
Psychological Pricing
Pricing that considers the psychology of prices and not simply the economics; the price is used to say something about the product
Reference Prices
Prices that buyers carry in their minds and refer to when they look at a given product
Promotional Pricing
Temporarily pricing products below the list price, and sometimes even below cost, to increase short-run sales
Dynamic Pricing
Adjusting prices continually to meet the characteristics and needs of individual customers and situations