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Definition
| The fixed cost per unit produced. A company's fixed costs of production are spread (averaged) over the total number of units produced. This number is used in the calculations of cost of goods sold (accountants do this task). |
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| An illegal marketing practice in which an advertising price special is used as bait (like baiting fish) to get customers into the store with the intention of switching them to a higher priced product. Its illegal to not have the advertised product (or provide rain checks for them). |
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| A pricing tactic in which customers pay shipping charges from set basing-point geographical locations, whether the goods are actually shipped from these points or not. See FOB (location) below. |
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| A method for determining the number of units that a firm must produce and sell at a given price to cover all its costs. |
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| The point at which the total revenue and total costs are equal and beyond which the company makes a profit; below that point, the firm will suffer a loss. |
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Definition
| A pricing tactic for two items that must be used together; one item is priced very low, and the firm makes its profit on another, high-margin item essential to the operation of the first item (HP ink-jet cartridges, Sony RAM) |
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Definition
| The contribution from each sale to fixed costs and profits. The difference between the price the firm charges for a product and the variable costs. |
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Definition
| 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. |
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| Cross-elasticity of demand |
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Definition
| When changes in the price of one product affect the demand for another item. For ex: when sales of gelatto or sherbert go down, the sales of ice-cream fall as well. |
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Definition
| A price-setting method based on estimates of demand at different prices. |
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Definition
| A pricing strategy in which the price can easily be adjusted to meet changes in the marketplace. |
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Definition
| Demand in which changes in price have large effects on the amount demanded. |
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Term
| F.O.B. (location) pricing |
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Definition
| Mostly a B2B term that is negotiable. Its a pricing tactic. If the terms are FOB Seattle then the selling price includes the cost of loading and transporting the product to Seattle. The customer has to pick up the product in Seattle. If the terms are FOB Pullman, then the sales price includes shipment to Pullman. |
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Definition
| Costs of production that do not change with the number of units produced. |
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| Freight absorption pricing |
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Definition
| A pricing tactic where the price of product is calculated to include shipping. |
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Definition
| Demand for a product in which moderate changes in price have little or no effect on the amount demanded. Ex: coffee shops will continue to buy coffee beans even if the prices doubles (they just pass the cost on to the end consumer) |
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Definition
| A set price or a price range in consumers’ minds that they refer to in evaluating a product’s price. Prices that are too different from this price are questioned. This phenomenon is an indicant of consumers being very 'programmed' |
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Definition
| The price the end customer is expected to pay as determined by the manufacturer; also referred to as the suggested retail price or MSRP/ |
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Definition
| A retail or manufacturer pricing policy of setting prices very low or even below cost on one product or one product line to attract customers into a store. The retail store of mfr will make up the lost earnings on the sale of other products that occur when the consumer is in the store. |
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Definition
| A method that uses cost and demand to identify the price that will maximize profits. |
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Definition
| The increase in total cost that results from producing one additional unit of a product. |
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Definition
| The increase in total income or revenue that results from selling one additional unit of a product. |
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Definition
| E-commerce that allows shoppers to purchase products through online bidding. |
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Definition
| A pricing strategy in which a firm introduces a new product at a very low price to encourage more customers to purchase it. |
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Definition
| Illegal pricing strategy in which a company sets a very low price for the purpose of driving competitors out of business. |
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Definition
| Products that have a high price and that appeal to status-conscious consumers. |
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Definition
| The assignment of value, or the amount the consumer must exchange to receive the offering. |
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Definition
| Selling two or more goods or services as a single package for one price. |
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Term
| Price elasticity of demand |
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Definition
| The percentage change in unit sales that results from a percentage change in price. A higher ration (>1.0) indicates a more price inelastic demand. |
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Definition
| The collaboration of two or more firms in setting prices, usually to keep prices high. Airlines used to do this much more. |
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Definition
| A pricing strategy in which one firm first sets its price and other firms in the industry follow with the same or vary similar prices. |
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Definition
| The practice of setting a limited number of different specific prices, called price points, for items in a product line. |
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Definition
| A pricing discount of charging reduced prices for purchases of larger quantities of a product. |
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Definition
| A very high, premium price that a firm charges for its new, highly desirable product. The idea is to gain sales from the top of the market (those consumers that don't mind paying a premium for the newest innovative product ex: a new phone) |
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Definition
| 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. |
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Definition
| The total of the fixed costs and the variable costs for a set number of units produced. |
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Term
| Trade or functional discounts |
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Definition
| Discounts off list price of products to members of the channel of distribution who perform various marketing functions. |
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Definition
| Pricing a new product low for a limited period of time in order to lower the risk for a customer. |
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Definition
| State laws that prohibit suppliers from selling products below cost to protect small businesses from larger competitors. |
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| Uniform delivered pricing |
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Definition
| A pricing tactic in which a firm adds a standard shipping price to the price for all customers regardless of the location. |
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| Value pricing or everyday low pricing (EDLP) |
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Definition
| A pricing strategy in which a firm sets prices that provide ultimate value to customers. |
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Term
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Definition
| The cost of production (raw and processed materials, parts, and labor) that are tied to and vary depending on the number of units produced. |
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Term
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Definition
| A practice of charging different prices to different customers in order to manage capacity while maximizing revenues. |
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