Key Terms
- artificial time constraints
- pricing strategy that creates a sense of urgency in buyers’ minds
- break-even pricing
- pricing strategy in which marketers choose a price that will cover all the costs of manufacturing
- bundle pricing
- pricing strategy that promotes purchasing multiple items at once; used to prod customers to purchase (and spend) more than they may have otherwise
- competition-based objective
- product pricing based on the prices of a company’s competitors
- consumer confidence
- an economic indicator that measures the degree of optimism that consumers have regarding the overall state of the country’s economy and their own financial situations
- cost-based objective
- product pricing based on the costs of doing business
- cross-elasticity of demand
- the change in price of one good or service as a similar good or service’s price changes
- customer value–based objective
- product pricing based on a company’s understanding of the value-added benefits of a product
- customer-driven objective
- product pricing based on what a customer is willing to pay for a product or service
- deceptive price advertising
- an unethical pricing practice in which the advertised price of a product is misleading to consumers
- demand
- a buyer’s ability and willingness to purchase a specific product or service
- demand curve
- a graph that illustrates the relationship between demand and price
- demand elasticity
- measure of the change in the quantity demanded in relation to the change in its price
- discretionary income
- a household’s money that is left over after all taxes and necessities are paid
- economy pricing
- setting a price much lower than competitors to sell high volumes of a product
- fixed costs
- costs of doing business that do not change based on number of units produced
- income effect
- the perception buyers have of how price changes will affect their income
- inflation
- an economic measure of the rate of rising prices of goods and services in an economy
- market share–oriented objective
- setting prices at, below, or above competitors in an effort to increase market share
- monopoly gouging
- when a seller increases the prices of goods and services that are not considered fair or competitive
- odd-even pricing
- psychological pricing strategy that uses prices that end with odd or even numbers to attract customers
- penetration pricing
- new product or service strategy that sets the lowest price possible in order to reach the majority of the market in the introduction stage
- predatory pricing
- when a company prices goods or services so low that other companies cannot compete
- prestige pricing
- a strategy marketers use to set high prices knowing that demand will increase with higher prices because the higher price increases the perceived value of the product
- price
- the exchange of something of value between a buyer and seller
- price anchoring
- a frame of reference for a buyer to set an expectation of a price
- price appearance
- the way in which a customer perceives a price based on how it is visually represented
- price discrimination
- selling goods and services at different prices to different customers
- price fixing
- two or more companies agreeing to set certain prices in the market
- price gouging
- when companies take advantage of a situation, typically an emergency or natural disaster, and charge exceptionally high prices for products or services
- price skimming
- pricing strategy in which a company initially sets a high price for a product or service and lowers it over time as new segments of the market are reached
- product line pricing
- setting a higher price for some product lines and lower price points for others in order to capture various target markets
- profit
- the financial gain of a company
- sales-oriented objective
- setting prices based on the goal of increasing the volume of sales
- substitutes
- products and services that are similar to the one being offered
- target return objective
- setting prices so they return a specific profit during a given period of time
- total costs
- total expenses of doing business
- total revenue
- the money generated from normal business operations
- unemployment rate
- measure of the number of people not employed in an economy during a given period of time
- variable costs
- costs that vary based on the number of units produced