Key terms

  • accounts receivable Accounts receivable refers to the money owed to a business by its clients (customers) and shown on its balance sheet as an asset.
  • Activity-Based Pricing Pricing based on all costs such as labor, building, and administration instead of only fixed costs.
  • bait-and-switch Relating to use of bait and switch (offering one attractive exchange initially, but not honoring the offer) in business, politics, and elsewhere.
  • bartering system Barter is a medium of exchange by which goods or services are directly exchanged for other goods or services without using a medium of exchange, such as money.
  • basing-point pricing goods shipped from a designated city are charged the same amount
  • belief mental acceptance of a claim as truth regardless of supporting or contrary empirical evidence
  • benefit an advantage, help or aid from something
  • break-even point The point where total costs equal total revenue and the organization neither makes a profit nor suffers a loss.
  • cash flow The movement of money into or out of a business.
  • collusion A secret agreement for an illegal purpose; conspiracy.
  • competitor A person or organization against whom one is competing.
  • conjoint analysis Conjoint analysis is a statistical technique used in market research to determine how people value different features that make up an individual product or service.
  • consumer buying process There are 5 stages of a consumer buying process. They are: The problem recognition stage, the search for information, the possibility of alternative options, the choice to purchase the product, and then finally the actual purchase of the product. This shows the complete process that a consumer will most likely, whether recognizably or not, go through when they go to buy a product.
  • consumer surplus The monetary gain obtained by consumers because they are able to purchase a product for a price that is less than the highest price that they would be willing to pay.
  • customary price A price that customers identify with particular items.
  • deadweight loss a loss of economic efficience that can occur when equilibrium for a good or service is not Pareto optimal.
  • demand curve The graph depicting the relationship between the price of a certain commodity and the amount of it that consumers are willing and able to purchase at that given price.
  • derived demand when demand for a factor of production or intermediate good occurs as a result of the demand for another intermediate or final good
  • discretion The freedom to make one's own judgements.
  • discretionary Available at one's discretion; able to be used as one chooses; left to or regulated by one's own discretion or judgment.
  • Economic Value for the Customer (EVC) Criteria used by marketers to determine price, based on the insight that a customer will only buy a product if its value to them outweighs the value of the closest alternative.
  • economies of scale The cost advantages that an enterprise obtains due to expansion. As the scale of output is increased, factors such as facility size and usage levels of inputs cause the producer's average cost per unit to fall.
  • equilibrium price The price of a commodity at which the quantity that buyers wish to buy equals the quantity that sellers wish to sell.
  • everyday low price Everyday low price ("EDLP") is a pricing strategy promising consumers a low price without the need to wait for sale price events or comparison shop.
  • fighter brand A pricing strategy where a company prices items lower than the competition in order to protect or gain market share.
  • forecast An estimation of a future condition.
  • fraud Any act of deception carried out for the purpose of unfair, undeserved, or unlawful gain.
  • fringe Outside the mainstream.
  • functional discount payments to distribution channel members for performing some service
  • game theory A branch of applied mathematics that studies strategic situations in which individuals or organizations choose various actions in an attempt to maximize their returns.
  • generic Not having a brand name.
  • Giffen good A good which people consume more of as the price rises; Having a positive price elasticity of demand. As price rises, more is consumed which increases demand.
  • heterogeneity This term describes the uniqueness of service offerings.
  • Hi-low price High-low pricing (or hi-low pricing) is a type of pricing strategy adopted by companies, usually small- and medium-sized retail firms, where a firm charges a high price for an item and later sells it to customers by giving discounts or through clearance sales.
  • inventory The stock of an item on hand at a particular location or business.
  • lease A contract granting use or occupation of property during a specified period in exchange for a specified rent.
  • List Price The manufacturer's suggested retail price (MSRP), list price or recommended retail price (RRP) of a product is the price which the manufacturer recommends that the retailer sell the product.
  • low-cost signalling A strategy of signalling to competitors that you intend to pursue a low-cost strategy.
  • marginal cost The increase in cost that accompanies a unit increase in output; the partial derivative of the cost function with respect to output. The additional cost associated with producing one more unit of output.
  • marginal cost Marginal cost is the change in total cost that arises when the quantity produced changes by one unit. That is, it is the cost of producing one more unit of a good.
  • marginal revenue Marginal revenue is the additional revenue that will be generated by increasing product sales by one unit.
  • marginal utility The additional utility to a consumer from an additional unit of an economic good.
  • market penetration having gained part of a market in which similar products already exist
  • Market Share The percentage of some market held by a company.
  • Market Share The percentage of a market (defined in terms of either units or revenue) accounted for by a specific entity.
  • marketing mix A business tool used in marketing products; often crucial when determining a product or brand's unique selling point. Often synonymous with the four Ps: price, product, promotion, and place.
  • misrepresentation A false statement of fact made by one party to another party, which has the effect of inducing that party into the contract.
  • off-price retailer firms that purchase goods below wholesale cost and sell below normal retail price
  • oligopolies An oligopoly is a market form in which a market or industry is dominated by a small number of sellers (oligopolists). Because there are few sellers, each oligopolist is likely to be aware of the actions of the others.
  • Opportunity Costs The costs of activities measured in terms of the value of the next best alternative forgone (that is not chosen).
  • perishable That which perishes or is short-lived.
  • predatory pricing A strategy of selling goods or services at a very low price in order to drive one's competitors out of business (at which point one can raise one's prices more freely).
  • price The cost required to gain possession of something.
  • price discrimination Occurs when sales of identical goods or services are transacted at different prices from the same provider.
  • price fixing In antitrust law, collusion between competitors in order to raise prices, at the expense of competitive pricing.
  • price point The price of an item, especially seen as one of a number of pricing options.
  • Price Points Price points are prices at which demand for a given product is supposed to stay relatively high.
  • price war Price war is a term used in the economic sector to indicate a state of intense competitive rivalry accompanied by a multi-lateral series of price reductions. One competitor will lower its price, then others will lower their prices to match. If one of them reduces their price again, a new round of reductions starts.
  • product line pricing the practice of charging different amount for goods or services that are variations on a base good or service
  • psychological pricing a marketing practice based on the theory that nominally different prices may be perceived differently
  • quality the ability of a product or service to consistently meet or exceed customer requirements or expectations.
  • quantity discount price reductions given for large purchases
  • receivables All the debts owed to a company by its debtors or customers.
  • recession A period of reduced economic activity
  • return on quality An internal management approach that evaluates the financial return of investments in quality.
  • seasonal discount price reductions given when an order is placed in a slack period
  • shopping goods Goods that require more thought and comparison than convenience goods. Consumers compare multiple attributes such as price, style, quality, and features.
  • status quo The state of things; the way things are, as opposed to the way they could be; the existing state of affairs.
  • straight rebuy the repurchase of a good with no changes to the details of the order
  • strategy a plan of action intended to accomplish a specific goal
  • supermarket a large self-service store that sells groceries and, usually, medications, household goods and/or clothing
  • surcharge An addition of extra charge on the agreed or stated price.
  • Surplus value The part of the new value made by production that is taken by enterprises as generic gross profit.
  • target market a group of people whose needs and preferences match the product range of a company and to whom those products are marketed
  • Total cost Total cost (TC) describes the total economic cost of production and is made up of variable costs, which vary according to the quantity of a good produced and include inputs such as labor and raw materials, plus fixed costs, which are independent of the quantity of a good produced and include inputs (capital) that cannot be varied in the short term, such as buildings and machinery.
  • Total Revenue Total revenue is the total receipts of a firm from the sale of any given quantity of a product.
  • utility The ability of a commodity to satisfy needs or wants; the satisfaction experienced by the consumer of that commodity.
  • value a customer's perception of relative price (the cost to own and use) and performance (quality)
  • Veblen good A good for which people's preference for buying them increases as a direct function of their price, as greater price confers greater status. As the price gets higher, demand rises.
  • viable Able to be done, possible.
  • willingness to pay The willingness to pay (WTP) is the maximum amount a person would be willing to pay, sacrifice, or exchange in order to receive a good or to avoid something undesired, such as pollution.
  • zone pricing the practice of modifying a basic list price based on the geographical location of the buyer
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