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| Overall sacrifice a consumer is willing to make--money, time, energy--to acquire a specific product or service. |
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| Company objective implemented by focusing on target profit pricing, maximizing profits, or target return pricing. |
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| Strategy implemented by firms with a particular profit goal; uses price to stimulate sales at a certain profit per unit. |
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| An economically-based pricing strategy that attempts to identify the price at which a product or service's profits are maximized. |
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| Strategy implemented by firms interested in the rate of profits relative to investments; designed to produce specific return on investment, usually expressed as a percentage of sales. |
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| Company objective based on the belief that increasing sales help the firm more than increasing profits. |
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| A company objective based on the premise that the firm should measure itself primarily against its competition. |
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| Strategy of setting prices similar to those of major competitors. |
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| Competitor-based pricing method; firm deliberately prices products above competitors to capture consumers who always shop for the best or for whom price does not matter. |
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| Competitor-oriented strategy; firm changes prices only to meet those of competition. |
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| Customer-Oriented Pricing |
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| Orientation that explicitly invokes the concept of customer value and sets prices to match consumer expectations. |
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| Strategy of selling innovation at a high price that innovators and early adapters will pay to obtain it, then lowering the price to capture (or skim) the next most price sensitive segment. |
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| Market Penetration Pricing Strategy |
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| Pricing strategy that sets low initial price of new product or service to build sales, market share, and profits quickly. |
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| Drop in unit cost as accumulated volume sold increases. |
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| How many units of a product or service consumers demand during a specific period at different prices. |
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| Prestige Products or Services |
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| Consumers purchase for status rather than functionality. |
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| Price Elasticity of Demand |
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| Measures how changes in price affect quantity of product demanded; specifically, ratio of the percentage change in quantity demanded to the percentage change in price. |
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| Market for a product or service that is price sensitive; relatively small changes in price generate large changes in quantity demanded. |
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| Market for a product or service that is price insensitive; relatively small changes in price do not generate large changes in the quantity demanded. |
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| Change in the quantity of a product demanded by consumers due to a change in their income. |
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| Consumers' ability to substitute other products for the focal brand and increase price elasticity of demand for the focal brand. |
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| Percentage change in demand for product A in response to percentage change in price of product B; see complementary products. |
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| Products whose demand curves relate positively, such that they rise or fall together in exact proportions. |
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| Products for which changes in demand relate negatively; a percentage increase in quantity demanded for one means a percentage decrease in quantity demanded for the other. |
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| Price against which buyers compare actual selling price of a product; facilitates evaluation processes. |
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| Higher price to which consumers can compare the selling price to evaluate a purchase. |
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| Price information stored in the consumer's memory, used to assess a current price offering. |
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| Everyday Low Pricing (EDLP) |
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| Strategy to emphasize the continuity of retail prices somewhere between the regular, nonsale price and deep discounted sales prices. |
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| Strategy to promote sales by temporarily reducing prices to encourage purchase. |
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| Pricing strategy that involves determining the costs of producing a product and adding a fixed amount to arrive at the selling price. |
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| Costs, primarily labor and materials, that vary with production volume. |
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| Costs that remain essentially at the same level, regardless of changes in the volume of production. |
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| Sum of variable and fixed costs. |
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| Technique to examine relationships among cost, price, revenue, and profit over different production and sales levels to determine break-even point. |
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| The point at which the number of units sold generates enough revenue to equal total costs; at this point, profits are zero. |
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| Price less variable cost per unit; used to determine the break-even point in units. |
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| Oligopolistic Competition |
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| When a few firms dominate a market. |
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| When two or more firms compete primarily by lowering prices. |
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| Practice of colluding with other firms to control prices. |
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| Many firms sell closely related but not homogeneous products; products may be viewed as but are not perfect substitutes. |
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| When different companies sell commodity products that consumers perceive as substitutable; price usually set according to laws of supply and demand. |
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| Employs irregular but not necessarily illegal methods; legally circumvents authorized distribution channels to sell goods at prices lower than those intended by the manufacturer. |
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| Pattern of buying both premium and low-priced merchandise or patronizing both status and price oriented retailers. |
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| Consumer pricing tactic to build store traffic by aggressively pricing and advertising regularly purchased items at or just above he store's cost. |
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| Extends leader pricing by lowering the price below the store's cost. |
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| Deceptive practice of attracting customers with a low advertised price (the bait), then pressuring them to purchase a higher priced model (the switch). |
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| Practice of setting very low prices with the intent to drive competitors out of business; illegal under bot the Sherman Act and the Federal Trade Commission Act. |
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| Practice of selling the same product t different resellers or ultimate consumers at different prices; some forms are illegal. |
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| Pricing tactic offering a reduced price based on the amount purchased; the more purchased, the higher the discount and the greater the value. |
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