Download 5.02 Study Guide

Objective 5.02 Study Guide
Factors ________________Price
 Costs and ________________
◦ ________________- Business costs that are not ________________ by changes in sales
________________ Examples: rent, utilities, ________________premiums
◦ variable - ________________costs that change ________________ to changes in sales
volume. ________________: cost of goods or ________________, sales commission,
________________ charges, advertising
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________________ and Demand
◦ Supply -the amount of ________________ or services that producers are
________________to provide. When there is a low ________________and supply is high
you need to ________________your prices lower.
◦ demand-the ________________ of goods or services that ________________ are willing
and able to buy at ________________prices. When the demand for your
________________ is high and supply is low, you can ________________a high price.
 ________________ Perception
◦ Different ________________markets have different ________________and opinions about
prices.
 Competition – the________________ among businesses for ________________dollars
 Government ________________
◦ ________________gouging – pricing above the ________________when no other retailer
is available
◦ price ________________ – an illegal practice in which competing ________________
agree, formally or informally, to ________________prices within a specified range
◦ resale ________________ maintenance – price fixing ________________by a manufacturer
on ________________ or retail resellers of its ________________ to deter price-based
________________
◦ unit ________________ – the pricing of goods on the ________________ of cost per unit
of ________________, such as a pound or an ounce, in ________________ to the pice
________________ item
◦ bait-and-________________ – a descriptive and ________________method of selling in
which a ________________, attracted to a store y an ________________ sale, is told either
that the advertised ________________is unavailable or is inferior to a higher-priced item
that is ________________
 ________________ trends – Using the internet can ________________customers with easy
access to prices, products ________________, and services and ________________ to
technological changes can give a business a ________________edge.
________________ Objectives
 Obtaining a target________________ on investment
◦ return on ________________ (ROI) – the amount earned as a result of an
________________
 ________________market share – is a business's________________ of the total sales
________________by all competing companies in a given ________________
 other objectives – can include social and ________________considerations, as well as meeting
the ________________prices and establishing an image
Pricing ________________decisions
 Setting a basic ________________setting
◦ cost-________________ pricing – where you consider your ________________costs and
your profit objectives
◦ ________________-based pricing – requires you to find out what ________________are
willing to pay for your product, then set the ________________accordingly
◦ ________________-based pricing – you need to find out what your ________________
charge, then decide what you should ________________ for your product
 ________________policies – establishing a pricing ________________ frees you from making
the same pricing________________over and over
 ________________life cycle pricing
◦ Stage 1: ________________ – sales volume is________________ low marketing costs are
high, and ________________are low or even in the negative
▪ ________________skimming – the practice of ________________ a high price on a
new product or service in order to ________________costs and maximize profits as
quickly as possible; the price is then dropped when the ________________or service is
no longer unique
▪ ________________pricing – a method used to build sales by ________________ a low
initial price to keep unit costs to ________________ as low as possible
◦ Stage 2: ________________– sales climb rapidly, units costs are ________________ the
product begins to show a profit, and________________come into the market
◦ Stage 3: ________________ – sales begin to slow and profits peak, but________________
fall of as competition increases
◦ Stage 4: ________________ – sales and profits ________________to fall
 ________________techniques
◦ ________________pricing – a pricing technique, most often used by retail businesses, that
are based on the belief that customers' perceptions of a product are strongly influenced by
price, odd/even pricing, price lining, promotional pricing, multiple-unit pricing, and bundle
pricing
▪ ________________pricing – a pricing technique in which higher-than-average prices
are used to suggest status and prestige to the customer
▪ odd/________________ pricing – a pricing technique to which odd-numbered prices are
used to suggest bargains
▪ price ________________ – a pricing technique in which items in a certain category are
priced the same
▪ ________________pricing – a pricing technique in which lower prices are offered for a
limited period of time to stimulate sales
▪ ________________unit pricing- a pricing technique in which items are priced in
multiples
▪ ________________ pricing – a pricing technique in which several complementary
products are sold at a single price, which is lower than the price would be if each item
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was purchased separately
Discount pricing
◦ ________________pricing – a pricing ________________ that offers customers
________________ from the regular price; some reductions are basic ________________off discounts and others are ________________discounts
________________and Revising Prices
 Break-Even ________________– The level of sales at which ________________equal total
costs - (Fixed Costs) / (unit selling price – variable costs) = Number of units needed to breakeven
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◦ ________________ price – the actual or projected price per unit
________________ -the amount added to the cost of an ________________ to cover
________________and ensure a profit (cost + markup = price; price – markup = cost; price –
cost = markup)
________________ – the amount of money taken off an original price (price * markdown
________________= $ markdown; price – markdown = sales price)
________________ – a pricing technique that offers ________________reductions from the
regular price; some reductions are basic ________________off discounts and others are
specialized discounts (price * discount percentage = discount dollars; price –
________________ dollars = discounted price)
Possible ________________to pricing strategy
◦ Adjusting prices to ________________profit – profit or loss is determined by the
________________ between your________________price and your costs. Before doing
either 2 ________________to ask:
▪ Are your products' pries ________________or inelastic?
▪ What are your ________________ price?
◦ Reacting to ________________ prices – you must keep your eye on
________________market prices for your products
◦ Revising________________of sale – you can change your credit ________________or
introduce trade, quantity, or cash discounts
________________limit – the maximum amount a ________________ may allow a customer
to change without getting special authorization
________________ of demand – The degree to which demand for a good or
________________varies with its price.
________________ceiling – The maximum price a seller is ________________to charge for a
product or service.