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    of 3

    management 3.

    18 marketing

    Pricing

    Complete the text using these words:

    competitive components market leader market segments


    market share monopolist overheads plant
    sensitive substitute target volumes

    The price of a product should logically cover its production and distribution costs, including
    a proportion of the company's fixed costs or (1) overheads , such as rent and interest payments,
    and leave a small profit. But prices are also influenced by the level of demand, the prices of
    (2) substitute products, and the prices charged by competitors.

    High quality products made with expensive (3) components and requiring a lot of craftsmanship are
    obviously expensive. They also generally require "prestige pricing" as the consumers in their
    (4) target market would not buy them if they thought the price was too low. The markets for most
    other goods are generally price (5) sensitive , i.e. the lower the price, the greater the sales.

    But for new products for which there is a sufficiently high demand, companies may choose to set the
    highest possible price so as to maximize profits. This is known as market-skimming. The price can
    later be reduced in order to reach further (6) .market
    . . . . . . segments
    . . .. . The opposite strategy is market-penetration,
    which means setting as Iowa price as possible so as to increase sales volume and (7) market share , leading
    to lower unit production and distribution costs and higher long-run profit. The low price will also
    discourage competitors.

    Companies with overcapacity, intensive competition, a large inventory, or a declining market are likely
    to cut the prices of established products. They are more concerned with keeping the (8) plant .
    going and staying in business than making a current profit. On the contrary, firms facing rising costs,
    or in need of cash in the short term, tend to raise prices. A company faced with demand that exceeds
    supply is also likely to raise its prices, like a (9) monopolist .

    competitive
    Firms in perfectly (10) markets, or homogeneous-product markets, or small firms in an
    industry with a strong (11) market leader, are likely to use going-rate pricing, i.e. they will charge more
    or less the same price as everyone else, rather than set a price based on estimates of costs or projected
    demand.

    But of course, all prices can be adapted. Most companies offer cash discounts to customers who pay
    immediately, and quantity discounts to buyers of large (12) .volumes
    . . . . . . . .. . Many products and services
    are sold at a lower price during an off-season. Retailers often offer some loss-leader prices: they cut the
    prices of selected products to cost price or below in order to attract customers who also buy other goods.
    Companies are also often obliged to react to price changes by competitors. They might try to avoid a
    price war by modifying other elements of the marketing mix. Similarly, they have to anticipate
    competitors' reactions if they change their own prices.

    Now translate the highlighted expressions in the text into your own language.

    79
    www.tienganhedu.com
    www.tienganhedu.com

    undercuts
    price wars
    predatory pricing

    collude
    pricing fixing restrictive practice

    cartel

    x
    x
    x
    x
    x
    x

    a. loss leaders

    b. predatory pricing

    c. price discrimination

    d. price wars/ undercuts


    e.
    restrictive
    f. cartels practices

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