Pricing Dictionary

Talk pricing like a pro

Captive Product

The pricing of products that have both a "core product" and a number of "accessory products."

Competitor-Based Pricing

Utilizing competitor prices as a pricing benchmark instead of company costs or customer value.

Cost Plus 

Where a price is established by evaluating all variable costs a company incurs and adding a markup percentage.

Customer Value 

A strategy that offers incentives to purchase aside from just getting the base product being paid for.

Customized Pricing

To tailor the prices of goods or services for specific customer preferences.

Discount

To deduct a certain percentage off the original market price.

Economy Pricing

A method of pricing in which a low price is assigned to a product with decreased production costs.

Face Value

The initial nominal dollar value.


Flat-Rate Pricing

A consistent price per unit regardless of the amount purchased.

Freemium

A business model that offers free and premium packages. Basic services are offered for free, and customers are able to upgrade to premium packages for more services.


Geographical Pricing

To adjust the selling price of a product or service according to a customer’s location.


Market-Oriented Pricing

A method of pricing in which price is based off of current market conditions.


Odd-Even Pricing

A psychological pricing tactic in which numeric value is utilized to affect the customer's perception of product value.


Optional Product Pricing

When a company sells a base product at a relatively low price, but sells complementary accessories at a higher price.


Overpricing

To set a price over the actual value of the product.


Penetration Pricing

When a company strategically lures customers away from a competitor by setting a low initial price.


Power Pricing

When a seller strategically uses pricing as a key tool to achieve their business and financial aims.


Predatory Pricing

A method of pricing in which a seller sets a price so low that other suppliers cannot compete and are forced to exit the market.


Premium Pricing

A markup on the original market price of an item used to create an illusion of higher quality.


Price Benchmarking

Comparing one's prices to the prices of competitors in a particular market segment.


Price Bundling

Combining several products or services into a single comprehensive package for an all-inclusive reduced price. 


Price Consulting

When a pricing expert or professional offers strategic advice on future pricing plans.


Price Controls

Restrictions implemented by the government on the pricing of products and services.


Price Corridor

An analytical representation of the average price levels in the market.


Price Differentiation

A pricing strategy that charges different segments of customers altered prices for the same products or services.


Price Elasticity

A measure of customer responsiveness in terms of demand for a certain product or service by adjusting the product or service price. More specifically, it provides the percentage of quantity demanded for a product or service in response to a one percent change in price.


Price Follower

A passive seller in a market whose pricing strategies compete to match the dominant seller in that market: the price leader.


Price Index

A normalized average of prices for a given type of product or service in a given sector, during a given interval of time.


Price Leader

The dominant seller in a market whose pricing strategies are competitively matched by the rest of the sellers in that market.


Price Negotiating

When a buyer and seller have a discussion to determine the price of product or service that is acceptable to both parties. At the end of the negotiation, either a deal is reached or there is no sale.


Price Point

A strategic price which maximizes demand and revenue for a product or service.


Price Sensitivity Meter 

A pricing technique that utilized four questions to derive consumer preferences data.


Price Stability

When there is little to no change in the economy over a period of time. This means that there is a lack of inflation or deflation occurring with prices.


Price War

Where businesses attempt to gain an advantage through competitive price cuts.


Pricing

The process of assigning a numerical value of monetary payment to be given in exchange for a product or service.


Price Strategy

A long or short-term plan of price-related decisions that a company commits to in order to maximize revenue.


Product Bundling

The process of selling a group of items as a combination package for a discounted price.


Profit Maximization

Utilizing analytical and tactical techniques to maximize the effectiveness of pricing.


Promotional Pricing

When a seller reduces the price of a product or service to attract customers as a marketing or sales tactic.

Psychological Pricing

A pricing strategy that utilizes specific techniques to form a psychological or subconscious impact on consumers.


Retail Price

The price charged to customers for purchases from a seller or retailer.


Reverse Pricing

A pricing model that allows the consumer to establish the pricing requirements and allow the seller to compete for their business.


Skim Pricing

Assigning a relatively higher price for a product or service.


Tiered Pricing

A pricing method used by sellers to segment the prices of their products and services based on specified target markets.


Underpricing

The pricing of a product or service that is far lower than the value of what is being sold.


Value-Based Pricing

Basing a product or service's price on how much the target consumers believes it is worth.


Van Westendorp

Dutch economist who created the Price Sensitivity meter in 1976 to measure the value-based pricing.


Velocity Pricing

A pricing method that derives the price of a product or service off of the velocity of its stock turn. The slower the turn, the higher the price.


Walk-Away Price

The lowest price that a buyer is willing to accept from a seller before they are no longer interested in purchasing.


Wholesale Price

The cost of buying items in bulk.


Yield Management

A profit maximization technique that makes strategic price adjustments to a product or service with a fixed expiration date.