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price usually is set according to the laws of supply and demand. Gray Market: Employs irregular but not necessarily illegal methods; generally, it legally circumvents authorized channels of distribution to sell goods at prices lower than those intended by the manufacturer. Everyday Low Pricing (EDLP): Astrategy companies use to emphasize the continuity of their retail prices at a level somewhere between the regular, nonsale price and the deep-discount sale prices their competitors may offer. High/Low Pricing: A pricing strategy that relies on the promotion of sales, during which prices are temporarily reduced to encourage purchases. Reference Price: The price against which buyers compare the actual selling price of the product and that facilitates their evaluation process. Market Penetration Strategy: A growth strategy that employs the existing marketing mix and focuses the firm's efforts on existing customers. Experience Curve Effect: Refers to the drop in unit cost as the accumulated volume sold increases; as sales continue to grow, the costs continue to drop, allowing even further reductions in the price. Price Skimming: A strategy of selling a new product or service at a high price that innovators and early adopters are willing to pay in order to obtain it; after the high-price market segment becomes saturated and sales begin to slow down, the firm generally lowers the price to capture (or skim) the next most price sensitive segment. Leader pricing is a legitimate attempt to build store traffic by pricing a regularly purchased item aggressively, but still above the store's cost. Loss Leader Pricing: Loss leader pricing takes the tactic of leader pricing one step further by lowering the price below the store's cost. Bait-and-Switch: A deceptive practice of luring customers into the store with a very low advertised price on an item (the bait), only to aggressively pressure them into purchasing a higher-priced model (the switch) by disparaging the low-priced item, comparing it unfavorably with the higher-priced model, or professing an inadequate supply of the lower-priced item. Price Discrimination: The practice of selling the same product to different resellers (wholesalers, distributors, or retailers) or to the ultimate consumer at different prices; some, but not all, forms of price discrimination are illegal. Price Fixing: The practice of colluding with other firms to control prices. Horizontal Price Fixing: Occurs when competitors that produce and sell competing products collude, or work together, to control prices, effectively taking price out of the decision process for consumers. Vertical Price Fixing: Occurs when parties at different levels of the same marketing channel (e.g., manufacturers and retailers) collude to control the prices passed on to consumers. Manufacturer’s Suggested Retail Price (MSRP): The price that manufacturers suggest retailers use to sell their merchandise. Marketing Channel Management: Also called supply chain management, refers to aset of approaches and techniques firms employ to efficiently and effectively integrate their suppliers.