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Marketing Chapters 13 & 14

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Chapter 13  
Cost-plus pricing A method of setting prices in which the seller totals all the costs for the product and then adds the desired profit per unit
Price-floor pricing A method for calculating price in which, to maintain full plant operating capacity, a portion of a firm's output may be sold at a price that covers only marginal costs of production
Demand-based pricing A price-setting method based on estimates of demand at different prices
Demand-backward pricing Starts with a customer-pleasing price followed up with cost-management strategies to hold costs to a satisfactory level
Chain-markup pricing A pricing strategy that extends demand-backward pricing from the ultimate consumer all the way back through the channel of distribution to the manufacturer
Price leader The firm that sets price first in an industry; other major firms in the industry follow the leader by staying in line
Value pricing, or every day low pricing (EDLP) A pricing strategy in which a firm sets prices that provide ultimate value to customers
Skimming price A very high, premium price that a firm charges for its new, highly desirable product
Penetration pricing A pricing strategy in which a firm introduces a new product at a very low price to encourage more customers to purchase it
Trial pricing Pricing a new product low for a limited period of time in order to lower the risk for a customer
Price Bundling Selling two or more goods or services as a single package for one price
Captive pricing A pricing tactic for two items that must be used together; one item is priced very low and the firm makes its profit on another, high-margin item essential to the operation of the first item
FOB origin pricing A pricing tactic in which the cost of transporting the product from the factory to the customer's location is the responsibility of the customer
FOB Delivered pricing A pricing tactic in which the cost of leading and transporting the product to the customer is included in the selling price, paid by the manufacturer
Zone pricing A pricing tactic in which customers in different geographic zones pay different transportation rates
Uniform delivered pricing A pricing tactic in which a firm adds a standard shipping charge to the price for all customers regardless of location
Freight absorption pricing A pricing tactic in which the seller absorbs the total cost of transportation
List price The price the end customer is expected to pay as determined by the manufacturer
Trade or functional discounts Discounts off list price of products to members of the channel of distribution that perform various marketing functions
Quantity discounts A pricing tactic of charging reduced prices for larger quantities of a product
Cumulative quantity discounts Discounts based on the total quantity bought within a specified time period
Non-cumulative quantity discounts Discounts based on the quantity purchased with individual orders
Internal reference price A set price or a price range in consumers minds that they refer to in evaluating a product's price
Price lining The practice of setting a limited number of different specific prices, called price points, for items in a product line
Bait-and-switch An illegal marketing practice in which an advertised price special is used as bait to get customers into the store with the intention of switching them to a higher-priced item
Loss leader pricing The pricing policy of setting prices below cost in order to attract customers into a store
Unfair sales acts State laws that prohibit suppliers from selling products below cost to protect small businesses from larger competitors
Price discrimination The illegal practice of offering the same product to different business customers at different prices and thus lessening competition
Price fixing The collaboration of two or more firms in setting prices, usually to keep prices high
Chapter 14  
Channel of distribution The series of firms or individuals that facilitates the movement of a product from the producer to the final customer
Channel intermediaries Firms or individuals such as wholesalers, agents, brokers, or retailers who help move a product from the producer to the consumer or business user
Breaking bulk Dividing larger quantities of goods into smaller lots in order to meet the needs of the buyers
Creating assortments Providing a variety of products in one location to meet the needs of buyers
Facilitating functions Functions of channel intermediaries that make the purchase process easier for customers and manufacturers
Wholesaling intermediaries Firms that handle the flow of products from the manufacturer to the retailer or business user
Independent intermediaries Channel intermediaries that are not controlled by any manufacturer but instead do business with many different manufacturers and many different customers
Merchant wholesalers Intermediaries that buy goods from manufacturers (take title to them) and sell to retailers and other business-to-business customers
Take title To accept legal ownership of a product and the accompanying rights and responsibilities of ownership
Merchandise agents or brokers Channel intermediaries that provide services in exchange for commissions but never take title to the product
Channel levels The number of distinct categories of intermediaries that populate a channel of distribution
Conventional marketing system A multiple-level distribution channel in which channel members work independently of one another
Vertical marketing system (VMS) A channel of distribution in which there is cooperation among members at the manufacturing, wholesaling, and retaining levels
Horizontal marketing system An arrangement within a channel of distribution I in which two or more firms at the same channel level work together for a common purpose
Intensive distribution Selling a product through all suitable wholesalers or retailers that are willing to stock and sell the product
Exclusive distribution Selling a product only through a single outlet in a particular region
Selective distribution Distribution using fewer outlets than in intensive distribution but more than in exclusive distribution
Channel leader A firm at one level of distribution that takes a leadership role, establishing operating norms and processes that reduce channel conflicts, reduce costs, and enhance delivered customer value
Physical distribution The activities used to move finished good from manufacturers to final customers including order processing, warehousing, materials handling, transportation, and inventory control
Warehousing Storing goods in anticipation of sale or transfer to another member of the channel of distribution
Materials handling The moving of products into, within, and out of warehouses
Inventory control Activities to ensure that goods are always available to meet customers' demands

Last Updated on 03/20/00
By Maria Ribaulo

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