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Ray Wright, Business-to-Business Marketing: A Step-by-Step Guide
Student Study Guide
Chapter 7: Pricing Strategies for Business
Markets
Summary
Questions
Activity
Case Study
Supplementary Information
Summary
In this chapter we examined the role that price and costing play in B2B marketing. A definition of
pricing was given and then its place within the marketing was discussed. The interaction between price
and products and services, distribution and promotion was examined and B2B compared with B2C. It
was argued that price was an under-utilised business tool in B2B marketing and so ways that it might
be used were identified and evaluated. We then went onto discuss the strategic factors that should be
determining the price.
Company objectives, strategies, costs, customer, market structure, levels of demand, competition
and legislation where identified and related to the pricing process. It was made clear that the overriding
concern was for pricing objectives was to meet both the marketing and corporate objectives and
examples of different objectives were given. The main pricing strategies used to achieve pricing
objectives were identified and reason given for usage. Again B2B was compared with B2C. New
product pricing and pricing across the product life cycle was briefly outlined before moving on to talk
about the differences between strategic and tactical pricing.
The importance of costs in the pricing process, their association with marketing and the different
types of costs were discussed emphasising the need to constantly monitor, control and reduce these to
maintain competitive advantage. Cost and profit centre and activity based costing were recognised, as
ways of trying to make certain that this would happen. Monopolies, oligopolies and competitive
markets were again examined but in the context of different pricing needs. Price and levels of demand,
price and competitive response and price and legislation were all shown to have an influence on pricing
strategies and could b not therefore be ignored in the process.
Other influences on pricing were discussed including price elasticity, price negotiations, the affect
of the Internet on pricing, price and global markets and strategic and tactical methods that could be
used in determining the price to be charged. Comparison between B2B and B2C markets were used
were ever possible.
Pearson Education © 2004
Ray Wright, Business-to-Business Marketing: A Step-by-Step Guide
Questions
Students will find below a series of 10 questions and all can be answered in general terms form the
information found in chapter 7. The more motivated student should be able to explore further in
journals, books, articles, and across the web for more in-depth information
1
Identify the factors that need to be examined when pricing in B2B markets. What are the
differences when compared with B2C markets?
2
What part will marketing theory and marketing concepts play in B2B marketing. Are there major
differences when compared with B2C markets?
3
How might pricing factors differ when comparing the public sector with the commercial sector in
B2B marketing? Why do some commentators argue that the movement of an organisation from
the public sector to the private sector could be beneficial for cost and pricing efficiency?
4
Discuss the various pricing strategies that might be used by B2B suppliers. Give examples of
companies that use the different strategic pricing approaches and examine why this might so.
5
Why might a supplier be able to charge different prices for its products and services in different
regions and countries? Are circumstances the same in both B2B and B2C and what forces might
work to stop this type of discriminatory pricing.
6
Discuss the proposition that ‘there are only two ways that an organisation can increase profits,
sell more or reduce costs’. How might a company reduce costs both internally and along the
supply chain.
7
Discuss the various pricing methods identified here. How might they be used in practice and
what are the advantages and disadvantages of each?
8
Is there an ethical case for paying above the norm prices in third world countries so that working
conditions can be improved? Identify and discuss examples where organisations have attracted
bad publicity.
9
Identify the role that governments play in B2B product and service pricing policies. Examine the
part that overseeing regulators, both nationally and internationally, have in policing the current
pricing legislation
10 Identify and analyse the steps involved in determining the price of the product.
Website addresses
Audit Commission auditing public bodies in the UK – (www.audit-commission.gov.uk)
Bartertrust (www.bartertrust.com)
Civil Aviation Authority (www.caa.co.uk)
European Competition Commission – ( http://europa.eu.int/comm/competition/mergers/cases)
MarketingShout > the Ultimate Business and Marketing Dictionary (www.MarketingShout.com)
Professional Pricing Society, dedicated to pricing management (www.pricesociety.com)
StudentShout marketing resource - (www.StudentShout.com )
The Competition Commission (www.competition-commission.org)
The International Reciprocal Trade Association (www.irta.com)
The Office of Fair Trading (www.oft.gov.uk)
Trading Standards Body seeing fair-play in the UK market place – www.tradingstandards.gov.uk
UK Data Protection Body – (www.dataprotection.gov.uk)
UK National Audit Office (www.open.gov.uk/nao/home)
Pearson Education © 2004
Ray Wright, Business-to-Business Marketing: A Step-by-Step Guide
Activity
The questions below where current at the time of writing and both can be investigate on the web where
I found a fund of information giving both sides of the argument.
1
There is a fierce dispute between the US and the EU over steel prices. The US wants an import
tax because of the feeling that steel is being dumped onto its markets and causing unfair price
competition for the home industry. Investigate this and similar disputes, put it in to context and
discuss the wrongs and right on what’s happening
2
Identify examples of pricing fixing on the web and discuss the individual case circumstances
identifying the reasons why cartel members operated in this way.
3
Look at the government, supra-government and international organisations such as the
Competition Commission, the European Commission and the WTO and discuss, or prepare a
presentation, on their attitude to the role that pricing plays in business markets
Website addresses
Audit Commission auditing public bodies in the UK – (www.audit-commission.gov.uk)
Bartertrust (www.bartertrust.com)
Civil Aviation Authority (www.caa.co.uk)
European Competition Commission – ( http://europa.eu.int/comm/competition/mergers/cases)
Federal Trade Commission (US equivalent of the UK Competition Commission) – (www.ftc.gov)
MarketingShout > the Ultimate Business and Marketing Dictionary (www.MarketingShout.com)
Professional Pricing Society, dedicated to pricing management (www.pricesociety.com)
StudentShout marketing resource - (www.StudentShout.com )
The Competition Commission (www.competition-commission.org)
The International Reciprocal Trade Association (www.irta.com)
The Office of Fair Trading (www.oft.gov.uk)
Trading Standards Body seeing fair-play in the UK market place – www.tradingstandards.gov.uk
UK Data Protection Body – (www.dataprotection.gov.uk)
UK National Audit Office (www.open.gov.uk/nao/home)
Pearson Education © 2004
Ray Wright, Business-to-Business Marketing: A Step-by-Step Guide
Case Study
Price fixing cartels
Congress investigates gas pricing
Oil industry executives rejected charges Tuesday that they manipulated gasoline supplies to increase
prices. A senator said there is strong evidence that oil companies work to maintain tight markets that
produce price spikes. Opening a hearing on the volatility of gasoline prices, senators said oil industry
practices of maintaining low inventories, along with growing market concentration, invited the sudden
gasoline price surges that have occurred in recent years.
"Price spikes are becoming a way of life . . . and not without serious consequences," Sen. Carl
Levin, chairman of the Senate Permanent Investigations Subcommittee, told the oil executives.
Levin cited the findings of a subcommittee report that charged refiners had withheld supplies to
force up gasoline prices during tight markets, including a 1999 BP Amoco memo that gives a blueprint
of actions that might be taken to maintain high prices. Levin said the "outrageous" internal memo
considered by senior executives at BP Amoco, now known only as BP, outlined a series of actions that
could be taken to maintain high prices in the Midwest, including shipping gasoline to Canada or getting
other refiners not to ship fuel into the region.
(Price spikes – price volatility and fluctuations) ©Associated Press 2002
Price fixing cartels
It is universally agreed that price-fixing cartels are almost unambiguously harmful - by raising prices
and restricting supply, they make goods and services unavailable to some consumers and unnecessarily
expensive for others. A study by the Organisation for Economic Cooperation and Development
(OECD) in 2000 estimated that in the US alone, ten recently condemned cartels cost individuals and
businesses many hundreds of millions of dollars annually, affecting commerce worth over US$10
billion with overcharges of over US$1 billion and additional economic waste of over US$1 billion.
The OECD calculated that the average illegal gain from price fixing is 10 per cent of the selling
price, but the harm to society may amount to 20 per cent of the volume of commerce affected by the
cartel. A cartel involving almost every major worldwide producer of graphite electrodes, recently
prosecuted in the US, affected US$5-7 billion dollars in sales worldwide; so the total costs of all cartels
would be far from trivial.
Cartels are neither rare nor short-lived. One study which tried to survey nearly all international
cartels successfully prosecuted by the US or the EC during the 1990s counted forty. The average
duration of these cartels was 6 years. Some lasted for two decades before intervention. For obvious
reasons, cartels rarely announce their formation. Therefore these represent only the tip of the iceberg.
European Commission and price cartels
The European Commission is constantly on the lookout for companies that are suspected of breaking
the law by colluding with others to fix prices in the hope of making higher profits without the need to
lower costs and become more productive necessary in a competitive environment. The Commission has
the power to impose fines of up to 10% of a company's turnover in its previous financial year for
infringements of the type identified in some case examples shown below. They also have the power to
enter suspected company premises at any time in the search for incriminating documents. Examples are
there carrying out dawn raids on a number of suspected PVC companies and on the premises of
Carlsberg in Copenhagen and Heineken in the Netherlands in ongoing investigation into alleged cartel
activity.
Pearson Education © 2004
Ray Wright, Business-to-Business Marketing: A Step-by-Step Guide
Case examples
To show how deeply rooted the problem is the following are examples of pricing cartels that have been
successfully prosecuted over the last decade.
One of the most notorious cases was the international vitamin cartel operated by a number of
European and Japanese companies in the second half of the 1990s. The cartel was led by Hoffman La
Roche AG of Switzerland and BASF of Germany, the world's two biggest vitamin makers, supported
by at least six other smaller producers all agreeing to raise the price of a range of vitamins over a period
of four to ten years. This massive price-fixing conspiracy inflated the cost of everything from breakfast
cereal and bread to hamburgers and confectionery. The European Commission imposed fines
exceeding €855 million for this breach of European competition law. The fines were by far the largest
ever imposed by the Commission. They were also prosecuted in the US were Hoffman La Roche and
BASF agreed to pay a total of $725 million to settle Justice Department price fixing charges. Members
of the ring also face potentially massive damage claims in 25 private lawsuits still pending in four
federal courts.
Price fixing affects all industries and all size of companies. Record fines were imposed by the
European Commission on 33 European cement producers and eight national cement associations for
running a cartel involving serious breaches of EU competition law, including market sharing and
regular exchanges of information. They also fined ten companies for running a secret market sharing,
price fixing and bid rigging cartel in heating pipes and for attempting to eliminate a competitor. 16
European steel makers were fined a record 104 million ECU's for operating a secret cartel to determine
prices and markets for steel building beams. Total fines of EUR25.72 million (US$24.65 million) were
imposed on seven producers of industrial and medical gases for their involvement in a cartel in The
Netherlands from 1993 to 1997. The parties involved colluded to fix the prices of several gases such as
oxygen, nitrogen, carbon dioxide and argon.
No company is too large is too large to escape the net. ABB (abb.com) along with German giant
Siemens (siemens.com) and a cluster of lesser-known companies also had to contribute to a nearly
$500 million fine imposed on the German cable industry for a price-fixing scheme uncovered there in
1997. Every company active in the cable industry had to pay a part of the fine based on their market
share because the authorities said every company was in the cartel. In the US senior executives can
even be sent to prison operating an illegal price-fixing cartel. When auction houses Christie's and
Sotheby's were found guilty of this offence prison sentences of up to three years duration were asked
for by the prosecution.
Call in the experts
Outside agencies can be used where price fixing is suspected. Experts will analysis in detail
transactions and/or bidding data to obtain a clear picture of the effect, if any, of an alleged conspiracy.
Such a study may be a major element of an economic analysis of liability, impact (the fact of injury)
and damages (the amount of overcharge) in price fixing and bid rigging matters as well as other matters
alleging collusive behaviour. Using such data, the volume of commerce affected by alleged
conspiracies can be assessed, pecuniary gains or losses can be assessed, and the duration and impact of
alleged conspiracies can be evaluated. Using this information fines can be imposed and injured parties
compensated.
Price fixing in B2C markets
Many commentators argued that the problem was more widespread and did not reside in B2B markets
alone. Fears were also voiced by others including the Office of Fair Trading, consumer champions such
as the consumer council and the large sections of the media about pricing misbehaviour in B2C
markets. In 2000, under the slogan ‘rip off Britain’ two major investigations into anti-competitive
price-fixing were instigated by the UK into price fixing in B2C markets one into supermarket prices,
the other into the costs of new cars. There results where inconclusive and left a general concern about
the role of ologopolies and so-called ‘complex monopolies’ in the movement and control of consumer
prices. As a result competition authorities were given greater powers to tackle illegal price
manipulation across entire sectors, such as petrol or supermarkets. Under these revised rules those
found guilty of operating price-fixing cartels could face criminal penalties as well as heavier fines.
Pearson Education © 2004
Ray Wright, Business-to-Business Marketing: A Step-by-Step Guide
Conclusion
There is no doubt that governments and politicians around the world worry about the ability of large
companies to work together to fix the prices. This becomes even more of a problem as organisation
become larger, global and more powerful. Higher prices eventually filter through to more expensive
end products for the consumers. Basic economics show that the higher the price the less goods and
services will be sold. This could then cause a slow down in economic growth, a range of products and
services becoming unavailable to certain groups of people across the world as well as allowing
companies to become sheltered from the positive economic affects of widespread competition. Most
countries have now instigated some kind of anti-competitive legislation and set up legislative bodies to
stop price fixing cartels operating aware of the deleterious consequences of inaction. The problems and
difficulties, however, will depend on the political will and the ability of legislators to impose
enforcement. Even if organisations are caught, and that isn’t easy, whether there can be successful
prosecutions will rest with the power of the courts, straightforward at a national level but much more
problematic in the international arena.
Case study questions
1
Discuss the reasons why oil companies and other organisations try to control the supply and
demand for oil. Do you think they should be able to manipulate the price?
2
Governments with modern economies all around the world are constantly upgrading anti-price
fixing laws by increasing fines and even sending proven wrongdoers to prison.
(a) What are the reasons why there is this obsessive concern with price fixing cartels?
(b) Do you think that the law can ever stop the practice?
(c) How is it that some cartels, OPEC for example are able to operate without prosecution?
(d) Discuss why you think it may or may not be stopped around the world.
3
Discuss the proposition the price fixing cartels are inherently unstable and will break down of
their own accord without the exposure of illegal price fixing by the government or other
regulatory agencies.
4
Do you think that market circumstances make price fixing more likely across B2B or B2C
markets? Give reasons and real examples if possible.
Website addresses
Audit Commission auditing public bodies in the UK – (www.audit-commission.gov.uk)
Bartertrust (www.bartertrust.com)
Civil Aviation Authority (www.caa.co.uk)
European Competition Commission – ( http://europa.eu.int/comm/competition/mergers/cases)
MarketingShout > the Ultimate Business and Marketing Dictionary (www.MarketingShout.com)
Professional Pricing Society, dedicated to pricing management (www.pricesociety.com)
StudentShout marketing resource - (www.StudentShout.com)
The Competition Commission (www.competition-commission.org)
The International Reciprocal Trade Association (www.irta.com)
The Office of Fair Trading (www.oft.gov.uk)
Trading Standards Body seeing fair-play in the UK market place – www.tradingstandards.gov.uk
UK Data Protection Body – (www.dataprotection.gov.uk)
UK National Audit Office (www.open.gov.uk/nao/home)
Pearson Education © 2004
Ray Wright, Business-to-Business Marketing: A Step-by-Step Guide
Supplementary Information
We often see unknown or uncertain pricing and costs terms used and so I thought it might be useful to
include a small pricing glossary here for the use of both students and instructors alike. It comes from a
business and marketing glossary I wrote for my website and it can be seen in full on
www.MarketingShout.com
Business and Marketing Glossary.
Price glossary
Price - the value agreed upon by the buyer and the seller in an exchange. One of the four controllable
variables of the marketing mix (See Four Ps (4Ps); Product; Place; Promotion.)
Price Adjustment – changes in retail or trade price to meet market conditions.
Price Band - the range within which a product can be priced as dictated by competitive intensity and
the perceived value of the product to consumers. (See Price Platform.)
Price Brand - a low price brand used tactically to combat the competition. Also known as a Fighting
Brand.
Price Bundling - various individual products are offered at a price less than the sum of the prices of
the products sold individually.
Price Ceiling - A price above which market prices are not permitted to rise. Usually imposed by
legislation (See Price Floor).
Price Collusion - companies working together to set the market price. This activity is usually
considered to be illegal. (See Price Manipulation.)
Price Comparison - the customer using price, rather than other benefits such as the brand or quality or
delivery to compare one product with another.
Price Competition - price is used as the major means of differentiating the product of one firm from
that of a competitor. (See Non-price Competition.)
Price Cycle - the seasonal, regular fluctuation in prices, e.g. on vegetables.
Price Deflator - an index used to eliminate the effect of inflation.
Price Differential - charging different prices in different markets, e.g. a supermarket charging more in
Kings Lynn than in Camden Town.
Price Discount strategy - always having some kind of price cut/sale to attract the customer, e.g. MFI
or Moben Kitchens.
Price Discovery - the transition from the general price level resulting from price determination to the
price for a particular quantity of a product with specific characteristics, such as location, quality and
size of lot.)
Price Discrimination - selling products at different prices to different intermediaries;
Price/Earnings Ratio (P/E ratio) - market price per share divided by Earnings Per Share (EPS). This
ratio gives an indication of the market’s view of the company’s growth potential, business risks
involved and dividend policy. In general, the higher the P/E ratio, the more highly rated is the
company by the market.
Price Effect - the effect of a price change on demand for a product.
Price Elasticity - the percentage change in price related to the percentage change in demand. Inelastic
demand = price changes cause little or no fluctuation in demand. Elastic demand = price changes
cause large fluctuations in demand. The opposite is Price In-elasticity.
Price Equilibrium - the market price when the demand for a product equals the amount willing to be
supplied at that price.
Price: Factory Gate Pricing – Buyers sometime negotiate a rock-bottom price with suppliers by
collecting the goods from the seller’s factory.
Price Fixing Agreements - companies joining together to dictate the price of products. It is illegal
Price Floor – a price below which products are not allowed to be sold (See Price Ceiling.)
Price: High and Low - depending on the product, e.g. whether unique, in short supply, perceived to
have added value etc.
Pearson Education © 2004
Ray Wright, Business-to-Business Marketing: A Step-by-Step Guide
Price Incentives - using price as a sales promotion to encourage purchase and trial.
Price In-elasticity - See Price Elasticity.
Price Instability - fluctuations in price arising from unstable demand and supply conditions.
Price Leader - powerful companies set the prices and others follow, e.g. Shell pushes up the price of
petrol and all the others follow.
Price Lining - pricing different products in a product line at various price points, depending on size
and features to make them attractive to a wider range of customers.
Price Manipulation - deliberate temporary distortion of a market price away from the competitive
level by one trader influencing price, or several traders acting together to influence price. Also
known as Price Collusion.
Price Mechanism - prices going up and down determine levels of supply and demand in a free market.
Price: Misleading – in the UK, under the Consumer Protection Act (1987), any pricing method that
can be shown to be misleading the customer, e.g. price reduction that is not in fact a price reduction.
The Office of Fair Training (OFT) will respond with fines if necessary.
Price: Non-Price Competition - competing on added value, brands, sales promotions, guarantees etc.,
rather than price.
Price Objectives - pricing for market penetration, profit, revenue, what the market might bear, in line
with the competition, customer perception, customer satisfaction. Linked with overall marketing and
corporate objectives.
Price Objection - an objection raised by the customer during the sales presentation about aspects of the
price, e.g. too high, credit terms, discounts, allowances, delivery etc.
Price of Non-Quality (PONQ) - what it costs to do things wrong, resulting in losses such as time,
money and opportunity. An equation for estimating PONQ is: the amount of time required to fix a
defect multiplied by the number of defects multiplied by the hourly wage rate (fully burdened with
overhead, overtime, benefits, etc.).
Price Parity - pricing products at the same margin as competitors.
Price Penetration - setting a low price to gain market share.
Price Perception - whether the customer sees price and value in harmony, or too high, or too low.
Price Platform – the price levels generally accepted by all businesses in the marketplace e.g. TVs at
£199, £299, £299 and so on. Also known as a price plateau. (See Price Point.)
Price Push - inflation caused by continually increasing prices on goods and services.
Price: Reference Price - the price that the customer will expect to pay for a product type.
Price Sensitivity - the interplay between price and supply and demand. (See Price Elasticity.)
Price Setter - large or monopoly companies able to dictate price levels in the industry. (See Price
Taker.)
Price Signalling - sophisticated ways that companies tell one another their pricing strategies without
overtly colluding and thus breaking the law, e.g. talking in the press about the need for general price
increases will signal intentions to other competitors.
Price Space - the price difference between items in a product line. Often critical as too little space may
confuse buyers and too much space may leave gaps to be exploited by competitors.
Price Support - governments supporting artificial price levels through subsidies or product purchase.
It is frowned upon in the EU unless it is used to support infant industries
Price Taker - small companies unable to dictate policy and so can only accept the price given by
others. (See Price Setter.)
Price-Value Relationship - the continuous interplay that customers make between price and quality,
e.g. ‘is it worth paying a little more for the extra value?’
Price Wars - companies competing aggressively on price first one, then another, driving down the
price.
Pricing: Follow the Leader - staying as near as possible to the market leader with regard to price.
Pricing; Leader - pricing products at lower than usual prices in order to attract shoppers. Also known
as loss leader pricing.
Pricing: Loss leader - pricing products below cost in order to attract customers.
Pricing Method - the way the company chooses to price its products. This, might be based on costs,
competition in the market, customer demand and customer perception.
Pricing Policies - ways and directions in which firms, the government and other agencies seek to
influence the prices of goods and services.
Pricing Policies and Strategies - how pricing sits within marketing planning and the part that it plays
in the marketing mix.
Pearson Education © 2004
Ray Wright, Business-to-Business Marketing: A Step-by-Step Guide
Pricing: Pre-Emptive - initial low price to dissuade market entry by the competition.
Price Skimming – the price is set high on market entry to obtain a premium form a customer segment
willing to pay more for an innovative product. Gradually the price is reduced as competition enters
so as to attract or keep more price sensitive segments.
Pricing Strategy - the long pricing methods used to achieve marketing objectives, e.g. every-day-lowprices, premium pricing, penetration pricing.
Cost glossary
Cost - the total money, time and resources associated with a purchase or activity. (See Opportunity
Cost.)
Cost advantage – the cost advantage that one company has over another, often because of economies
of scale.
Cost/Benefit Analysis - a technique designed to determine the feasibility of a project or plan by
quantifying its costs and benefits. It can apply to all form of costs other than finance.
Cost Centre - any area of business no matter how small or how large where all costs can be
realistically apportioned. (See Profit centre; ABC costing.)
Cost Drivers – the structural cost determinates of each activity that are largely under a company’s
control e.g. economies of scale, staff skills and learning, integration of activities, capacity
utilisation. Vertical integration.
Cost of Capital - the amount the company must pay for its capital.
Cost of Funds - the interest cost that a financial institution must pay for the use of money.
Cost of Goods Sold (COGS) - on an income statement, the cost of purchasing raw materials and
manufacturing finished products. Equal to the beginning inventory plus the cost of goods purchased
during some period minus the ending inventory. Also known as Cost of Sales.
Cost Per Customer Purchaser - a cost effectiveness measure used in direct marketing based on the
cost-per-sale generated.
Cost Per Ratings Point - a computation used by media buyers to compare the cost efficiency of
broadcast programmes that divides the cost of commercial time on a programme by the audience
rating.
Cost Per Thousand (CPT) - a computation used in evaluating the relative cost of various media
vehicles that represents the cost of exposing 1,000 members of a target audience to an advertising
message.
Cost Plus System - method of compensating advertising agencies whereby the agency receives a fee
based on the cost of the work it performs plus an agreed amount based on the success of the
campaign.
Cost-push inflation - in economics, a situation in which rising costs leads to rising prices. (See
Inflation; Demand-Pull Inflation.)
Costs: Direct - a cost directly attributable to the manufacture of a product. Opposite is ‘Indirect Cost’.
Costs: Full - the full cost of producing a product, including full allocation of overhead costs and
variable costs. (See Cost Centre.)
Costs: Historical - an accounting principle requiring all financial statement items, both fixed and
variable, to be based on original cost.
Costs: Indirect - the cost not directly attributable to the manufacturing of a product. Opposite is
‘Direct Cost’.
Costs: Fixed - a cost that does not vary depending on production or sales levels.
Costs: Marginal - the cost associated with one additional unit of production. Also known as
Incremental Costs.
Costs: Mixed - a cost with both fixed and variable elements.
Costs: Operating - the day-to-day expenses incurred in running a business, such as sales and
administration, as opposed to production. Also known as Operating Expenses.
Costs: Opportunity - the cost of passing up the next best choice when making a decision, e.g. the
opportunity cost of me working is no holiday.
Costs: Replacement - the amount it would cost to replace an asset at current prices.
Costs: Step variable costs - variable costs which change dramatically at certain points because they
involve large purchases that cannot be spread out over time.
Costs: Sunk - cost already incurred which cannot be recovered regardless of future events. So forget
and don’t pine!
Pearson Education © 2004
Ray Wright, Business-to-Business Marketing: A Step-by-Step Guide
Costs: Total - the sum of fixed costs, variable costs and semi-variable costs.
Costs: Transaction - costs incurred when buying or selling assets.
Costs: Unit - cost per item.
Costs: Variable - a unit cost that depends on total volume. Cost/Benefit Analysis A technique
designed to determine the feasibility of a project or plan by quantifying its costs and benefits.
Cost Value Logic - the use of economic definition of costs to reveal which parts of a business should
be retained, sold or shut down, and which should be kept or expanded: based on the notion of
opportunity cost and economic rent.
Cost-Per-Thousand (CPT or CPM) - used in advertising as a measure of cost per thousand people
viewing or reading the advertisement.
Cost-Plus Pricing - a pricing approach where an agreed percentage mark-up is added to the costs
(fixed and variable) of product, e.g. my full costs (fixed and variable) on the product is £20 add 50%
mark-up and I will sell at £30. It is unrealistic in a competitive market
Website addresses
Audit Commission auditing public bodies in the UK – (www.audit-commission.gov.uk)
Bartertrust (www.bartertrust.com)
Civil Aviation Authority (www.caa.co.uk)
European Competition Commission – ( http://europa.eu.int/comm/competition/mergers/cases)
MarketingShout > the Ultimate Business and Marketing Dictionary (www.MarketingShout.com)
Professional Pricing Society, dedicated to pricing management (www.pricesociety.com)
StudentShout marketing resource - (www.StudentShout.com)
The Competition Commission (www.competition-commission.org)
The International Reciprocal Trade Association (www.irta.com)
The Office of Fair Trading (www.oft.gov.uk)
Trading Standards Body seeing fair-play in the UK market place – www.tradingstandards.gov.uk
UK Data Protection Body – (www.dataprotection.gov.uk)
UK National Audit Office (www.open.gov.uk/nao/home)
Pearson Education © 2004