Chapter Fourteen: Pricing Concepts for Establishing Value
Price:
The overall sacrifice a consumer is willing to make—money, time, energy—to acquire a specific product or service
Target Return Pricing:
Pricing strategies designed to produce a specific return on their investment, usually expressed as a percentage of sales
Premium Pricing:
A competitor-based pricing method by which the firm deliberately prices a product above the prices set for competing
products to capture those consumers who always shop for the best or for whom price does not matter
Comparative Parity:
firm's strategy of setting prices that are similar to those of major competitors
Status Quo Pricing:
A competitor-oriented strategy in which a firm changes prices only to meet those of competition
Customer Orientation:
A company objective based on the premise that the firm should measure itself primarily according to whether it meets
its customers’ needs
Demand Curve:
Shows how many units of a product or service consumers will demand during a specific period at different prices
Prestige Products/Services:
Those that consumers purchase for status rather than functionality
Price Elasticity of Demand:
Measures how changes in a price affect the quantity of the product demanded; specifically, the ratio of the
percentage change in quantity demanded to the percentage change in price
Elastic:
Refers to a market for a product or service that is price sensitive; that is, relatively small changes in price will generate fairly large
changes in the quantity demanded
Inelastic:
Refers to a market for a product or service that is price insensitive; that is, relatively small changes in price will not generate large
changes in the quantity demanded
Dynamic/Individualized Pricing:
Refers to the process of charging different prices for goods or services based on the type of customer, time of
the day, week, or even season, and level of demand
Income Effect:
Refers to the change in the quantity of a product demanded by consumers due to a change in their income
Substitution Effect:
Refers to consumers’ ability to substitute other products for the focal brand, thus increasing the price elasticity of demand
for the focal brand
Cross-Price Elasticity:
The percentage change in demand for product A that occurs in response to a percentage change in price of product B
Complementary Products
: Products whose demand curves are positively related, such that they rise or fall together; a percentage increase in
demand for one results in a percentage increase in demand for the other
Substitute Products:
Products for which changes in demand are negatively related; that is, a percentage increase in the quantity demanded for
product A results in a percentage decrease in the quantity demanded for product B.
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- Spring '08
- Kimbrough
- Pricing
