Glossary: Chapter 19



	Glossary Chapter 19: Setting Prices Jump to a chapter's terms: 1 \| 2 \| 3 \| 4 \| 5 \| 6 \| 7 \| 8 \| 9 \| 10 \| 11 \| 12 \| 13 \| 14 \| 15 \| 16 \| 17 \| 18 \| 19 \| 20 \| 21 \| 22 \| 23 \| 24 Average fixed cost The fixed cost per unit produced, calculated by dividing fixed costs by the number of units produced. p. 594 Average total cost The sum of the average fixed cost and the average variable cost. p. 594 Average variable cost The variable cost per unit produced, calculated by dividing the variable costs by the number of units produced. p. 594 Break even point The point at which the costs of producing a product equal the revenue made from selling the product. p. 597 Competition oriented pricing A pricing method whereby a business considers costs and revenue to be secondary to competitors' prices. p. 606 Cost oriented pricing A pricing method whereby a monetary amount or percentage is added to the cost of a product. p. 604 Cost plus pricing A pricing method based on adding a specified amount or percentage to the seller's cost after that cost is determined. p. 604 Customary pricing A pricing method whereby goods are priced primarily on the basis of tradition. p. 601 Demand curve A graph of the quantity of products expected to be sold at various prices, if other factors remain constant. p. 590 Demand oriented pricing A pricing method based on the level of demand for a product, resulting in a high price when demand is strong and a low price when demand is weak. p. 604 Everyday low pricing (EDLP) The reduction of retail prices of leading brands for a prolonged period. p. 603 Experience curve pricing A pricing policy in which a company expands its market share by fixing a low price that high cost competitors cannot match. p. 603 Fixed costs Those costs that do not vary with changes in the number of units produced or sold. p. 594 Marginal cost (MC) The extra cost a company incurs when it produces one more unit of a product. p. 594 Marginal revenue (MR) The change in total revenue that occurs when a company sells an additional unit of a product. p. 595 Marketing oriented pricing A pricing method whereby a company takes into account a wide range of factors including marketing strategy, competition, value to the customer, price-quality relationships, explicability, costs, product line pricing, negotiating margins, political factors and effect on distributors/retailers. p. 606 Mark-up pricing A pricing method whereby a product's price is derived by adding a pre-determined percentage of the cost, called mark-up, to the cost of the product. p. 604 Misleading pricing Pricing policies that intentionally confuse or dupe consumers. p. 602 Odd-even pricing A pricing method that tries to influence buyers' perceptions of the price or the product by ending the price with certain numbers. p. 601 Penetration pricing A pricing policy of setting a price below the prices of competing brands in order to penetrate a market and produce a larger unit sales volume. p. 599 Pioneer pricing The setting of a base price for a new product. p. 599 Prestige pricing A pricing method whereby prices are set at an artificially high level to provide prestige or a quality image. p. 601 Price differentiation A pricing method used when a company wants to use more than one price in the marketing of a specific product. p. 604 Price elasticity of demand A measure of the sensitivity of demand to changes in price. p. 592 Price leaders Products sold below the usual mark-up, near cost or below cost. p. 603 Price lining A pricing method whereby a business sets a limited number of prices for selected groups or lines of merchandise. p. 601 Price skimming A pricing policy whereby a company charges the highest possible price that buyers who most desire the product will pay. p. 599 Pricing method A mechanical procedure for assigning prices to specific products on a regular basis. p. 604 Pricing policy A guiding philosophy or course of action designed to influence and determine pricing decisions. p. 599 Professional pricing Pricing used by people who have great skill or experience in a particular field or activity. p. 602 Promotional pricing Pricing related to the short term promotion of a particular product. p. 602 Psychological pricing A pricing method designed to encourage purchases that are based on emotional rather than rational responses. p. 600 Special event pricing Advertised sales or price cutting that is linked to a holiday, season or event to increase sales volume. p. 603 Total cost The sum of average fixed costs and average variable costs multiplied by the quantity produced. p. 594 Variable costs Those costs that vary directly with changes in the number of units produced or sold. p. 594