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Exam 3 Chapter 14

Bait and switch
Unlawful deceptive practice that lures customers into ta store by advertising a product at a lower price than usual prices (bait) then induces the customers to switch to a high price model (the switch)
Break Even Analysis
Technique that evaluates the relationship between total revenue and total cost to determine profitability at various sales levels.
Break even point quantity
The quantity at which total revenue equals total cost and beyond which profit occurs.
Cherry Picking
Customers visiting a store and buying only merchandise sold at big discounts or buying the best styles and colors
Dynamic Pricing
Charging different prices for the same offerings, depending on the season, customer, or level of demand. (individualized pricing)
Sensitivity to price change
ie) chocolate or something cheap
Everday Low Pricing Strategy
A pricing strategy that stresses continuity of retail prices at a level somewhere between the regular non-sale price and the deep discount sale price of the retailer’s competitors.
First-Degree Pricing Discrimination
Charging customers different prices on the basis of their willingness to pay
Costs that are stable and don’t change based on how many things you produce.
Offering localized promotions for retailers in close proximity to the customer, as determined by phone location technology.
High/Low Pricing Strategy
A strategy in which retailers offer prices that are sometimes above price, but they use advertising to promote frequent sales.
Horizontal Price Fixing
An agreement between retailers in direct competition with each other to charge the same price
Individualized Pricing
Charging different prices for the same offerings, depending on the time, season, customer, or level of demand. (dynamic pricing)
Demand does not change much when the price does.
Ie) insulin or expensive things
Initial Markup
The retail selling price initially placed on the merchandise less the COGS
A method of setting retail prices in which retailers simply double the cost of the merchandise to obtain the original retail selling price
Leader Pricing
Pricing strategy in which certain items are priced lower than normal to increase the the traffic flow of customers or to increase the sale of complementary products
Loss Leader
An item priced near or below cost to attract customers traffic into the store
Low price guarantee policy
A policy that guarantees that the retailer will have the lowest possible price for a product or group of products and usually promises to match or better any lower price found in the local market
Maintained Markup
Markup the retailer wishes to maintain on a category of merchandise.
The percentage reduction in the initial retail price
Multiple-unit pricing
Practice of offering two or more similar products or services for sale at one price (quality discounts)
Odd pricing
Ending in an off number or just under a round number.
Predatory Pricing
A method of establishing merchandise prices for the purpose of driving competition from the marketplace
Price Bundling
Offering two or more different products for sale at one price.
Price Elasticity
A measure of the effect a price has on consumer demand.
Price Lining
A pricing policy in which a retailer offers a limited number of predetermined price points within a classification.
Pricing Optimization Software
Software program that uses algorithms that analyzes past and current merchandise sales and prices, estimates are the relationship between prices and sales generated, and then determined the optimal initial price for the merchandise and size and timing of markdowns.
Includes 3 things: Markdowns, discounts to employees and customers, and inventory shrinkage due to shoplifting, breakage, or loss.
Reference Price
A price in the consumers mind that they refer to when they are buying something.
Second-Degree price discrimination
Charging different prices to different people on the basis of the nature of the offering.
A practice in which customers visit stores to interact with a physical produce and receive sales assistance then purchase it through a less expensive channel, such as online
Third-Degree Price Discrimination
Charging different prices to different demographic market segments
Relationship of what a customer gets to what he or she pays for it
Variable Cost
Cost that cary with the level of sales and can be applied directly to the decision in question
Yield Management
The practice of adjusting prices up and down in response to the demand to control sales generated
Zone Pricing
Charging different prices for the same merchandise in different geographic locations to be competitive in local markets.
-ie) charging same item different at tucson mall as opposed to la encantada.

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