MKT: Chapter-10. Marketing Key Terms.

 

Chapter-10

Pricing: Understanding and Capturing Customer Value

1.     Price: In the narrowest sense, price is the amount of money charged for a product or service. More broadly, price is the sum of all the values that customers give up in order to gain the benefits of having or using a product.

2.     Price Celling: Customers’ perceptions of the products’ value set the celling for prices. If customers perceive that the price is greater than the product’s value, they will not buy the product. In essence, no demand above the price.

3.     Price Floor: Product’s costs set the floor for prices. If the company prices the product below its cost, the company’s profit will suffer. In essence, no profits below this price.

4.     Value-based pricing: Value-based pricing uses buyers’ perceptions of value, not the seller’s cost. It means setting prices based on buyers’ perceptions of value rather than on the seller’s cost.

5.     Good-value pricing: It means offering just the right combination of quality and good service at a fair price.

6.     Value-added pricing: To increase their pricing power, many companies adopt value-added pricing strategies rather than cutting prices to match competitors, they attach value-added features and services to differentiate their offers and thus support higher prices.

7.     Cost-based pricing: Cost-based pricing involves setting prices based on the costs for producing, distributing and selling the product plus a fair rate of return for its effort and risk.

8.     Fixed cost: Costs that do not vary with production or sales level.

9.     Variable cost: Costs that vary directly with the level of production.

10. Total cost: The sum of the fixed and variable costs for any given level of production.

11. Break-even analysis: Setting price to break even on the costs of making and marketing a product or setting the price to make a target profit.