Chapter 11 Review Essay

Chapter 11 Review

1. Psychological pricing the organization establishes prices that appeal to tendencies in consumer behavior. It's a practice used more often by retailers than by manufacturers o Prestige Pricing - A situation where a high price contributes to the image of a product and to the status of the buyer. Example : Rolex o Odd-Even Pricing – Establishing prices below even dollar amounts.

Example: pair shoes placed at $49.99 sounds better than $50.00 o Customary Pricing - Matching prices to a buyer’s expectations; the price reflects tradition or is a price that people are accustomed to paying.

Example: consumers have preconceived notions about how much a cup of coffee should cost; it may be less expensive at Team Hortons compared

Example: price rangers for business suits could be set in the $300 range ($399), the $500 range($599). o Unit Pricing - Expressing price in terms of a unit of measurement (cost per gram or cost per milliliter).

2. Loss Leader – Products offered for sale at or slightly below cost. Example: with the manufacturer’s approval, big box retailers will sell printers at very low prices ( even below cost) because they do their money on replacement cartridges that tend to be quite expensive.

3. Multiple Unit Pricing – offering a lower price per unit for the purchase of two or more products of the same type when bought together than when units are bought singly. Example: buy 4 items for $10 or 1 item for $2.65

4. F.O.B origin pricing – The buyers takes title when the product is on common carrier ( e.g., a truck)

F.O.B Destination – The seller pays all freight necessary to reach a stated destination.

5. Uniform delivered pricing The buyer’s price includes an average freight cost that all customers pay regardless of location. The same price is charged to all

Zone pricing Prices increase as shipping distances increaseAll costumers within a designed geographic area pay the same freight