Pricing Strategies and Tactics

• Study notes created from provided business definitions

Pricing Strategies & Tactics

• Bait pricing aims to lure consumers into a store using misleadingly advertised prices, then uses high-pressure sales tactics to sell more expensive items.
• Base price represents the general price level a company anticipates selling goods/services at.
• Basing-point pricing involves charging freight from a specific point, irrelevant of the actual shipping origin.
• Break-even analysis is a method to determine the sales volume needed for total revenue to equal total costs.
• Cash discount is a price reduction for prompt bill payment offered to consumers, industrial users, or marketing intermediaries.
• Consumer penalty is an extra fee charged when a consumer violates the purchase agreement terms.
• Cumulative quantity discount is a deduction from the list price based on a buyer's total purchases over a period.
• Demand describes the quantity of a product sold at various prices during a specific period.
• Dynamic pricing involves rapidly changing prices, often in real-time, using software.
• Elastic demand exists when consumer demand significantly changes due to price changes.
• Extranet is a private electronic network connecting a company with its suppliers and customers.
• Fixed cost remains constant regardless of changes in output.
• Flexible pricing (variable pricing) involves charging different prices to different customers for the same merchandise bought in equal quantities.
• FOB origin pricing requires the buyer to cover freight costs from the shipping point.
• Freight absorption pricing occurs when the seller covers all or part of the actual freight charges.
• Functional discount (trade discount) is a discount offered to wholesalers/retailers for their channel functions.
• Inelastic demand refers to a situation where price changes minimally affect product demand.
• Keystoning is marking up prices by 100% (doubling the cost).
• Leader pricing (loss-leader pricing) involves selling a product near or below cost, expecting customers to buy other items.
• Market share is a company's product sales as a percentage of total sales for the industry.
• Markup pricing is the cost of the product from the producer, plus amounts for profit and expenses.
• Noncumulative quantity discount is a deduction from the list price for a single order, not the total volume over time.
• Odd-even pricing (psychological pricing) uses odd-numbered prices to suggest bargains and even numbers to imply quality.
• Penetration pricing is a policy of setting a low price for a new product to quickly gain mass market share.
• Predatory pricing is charging very low prices to drive competitors out of the market.
• Price is what is given up in exchange for a good or service.
• Price bundling involves marketing two or more products together for a special price.
• Price fixing is an agreement between firms on the price they will charge for a product.
• Price lining is offering a product line with items at specific price points.
• Price skimming is a policy of charging a high introductory price, often with heavy promotion.
• Price strategy is a long-term framework that establishes initial pricing/direction over the product lifecycle.
• Profit is revenue minus expenses.
• Promotional allowance (trade allowance) is a payment to a dealer for promoting a manufacturer's products.
• Quantity discount is a price reduction offered for buying in bulk (multiple units).
• Rebate is a cash refund for purchasing a product during a specific period.
• Return on Investment (ROI) is net profit after taxes divided by total assets.
• Revenue is the price charged to customers multiplied by the number of units sold.
• Seasonal discount is a price reduction for buying merchandise out of season.
• Single-price tactic offers all goods/services at one price (or perhaps two or three prices).
• Status quo pricing aims to maintain existing prices or meet competitors' prices.
• Supply is the quantity of a product offered by a supplier at various prices during a period.
• Surge pricing occurs in fluid markets where demand/prices change rapidly, often hourly.
• Two-part pricing charges two separate amounts to consume a single good or service.
• Unfair trade practice acts are laws that prohibit wholesalers/retailers from selling below cost.
• Uniform delivered pricing involves the seller paying actual freight charges and billing purchasers a flat rate.
• Value-based pricing is setting a price that seems reasonable to the customer compared to other options.
• Variable cost changes with the level of output.
• Zone pricing divides a market into zones with flat freight rates for each.