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Chapter 10 Definitions

Price: The amount of money charged for a product or service, or the

sum of the values that buyers exchange for the benefits of having or

using the product or service.

Value-Based Pricing: Setting price based on buyers' perceptions ofvalue rather than on the seller's cost.

Everyday Low Pricing (EDLP): A pricing strategy that charges

comparatively low prices all the time, with few or no "sales."

Good-Value Pricing: Offering just the right combination of quality and

good service at a fair price.

Value-Added Pricing: A strategy of developing features that add

value to the market offering, rather than cutting price.

Oligopolistic Competition: A market condition where there are fewsellers, and each is highly sensitive to the others' prices.

Fixed Costs: Costs that do not vary with number of products

produced.

Target Costing: Pricing that starts with an ideal selling price, then

dictates costs that will ensure that the price is met.

Demand Curve: A graphical representation of the relationship

between price and demand that usually proposes that demand

increases as price decreases.

Variable Costs: Costs that vary directly with the number of productsproduced.

Target Profit Pricing: A pricing method that calculates break-even

price for a product then adds a desired (target) profit.

Pure Competition: A market condition in which there are many

buyers and sellers trading in commodities.

Price Elasticity: A measure of the sensitivity of demand to changes in

price.

Monopolistic Competition: A market condition in which manybuyers and sellers trade a variety of products over a range of prices,

rather than allowing the market to set the price.

Break-Even Pricing: Setting price to break even on the costs of

making and marketing a product; or setting price to make a target

profit.

Cost-Plus Pricing: Adding a standard markup to the total cost of

producing (or purchasing) the product.

Pure Monopoly: A market condition where there is only one seller of

a service, product, or commodity.

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Market Skimming Pricing (Price Skimming): Setting a high price for

a new product to skim maximum revenues layer by layer from the

segments willing to pay the price.

Market Penetration Pricing (Penetration Pricing): A strategy that

sets a low price for a new product to attract a segment of buyers, then

raises the price.

Product Line Pricing: Setting the price steps among products in a

product line based on cost differences and customer perceptions of

the products' values.By-Product Pricing: Setting a price for by-products to make the main

product's price more competitive.

Optional-Product Pricing: The pricing of optional or accessory

products along with a main product.

Captive-Product Pricing: Setting a price for products that must be

purchased along with a main product.

Bundle Pricing: Setting one price for a set of products. This price is

valid only if all the products in the set are purchased.