Producer Wholesaler Retailer Consumer
LESSON 7
PRICING
All products and all services have prices. Price is the amount of money that has to be paid to acquire a given product. Insofar as the amount people are prepared to pay for a product represents its value, price is also a measure of value. The price depends on different thing such as credit terms, delivery, trade-in allowance, guarantees, quality and other forms of service.
The function of prices may be analyzed into three separate functions. First, prices determine what goods are to be produced and in what quantities; second, they determine how the goods are to be produced; and third, they determine who will get the goods.
The goods so produced and distributed may be consumer items, services, labour, or other salable commodities. In each case, an increase in demand will lead to the price being bid up, which will induce producers to supply more; a decrease in demand will have the reverse effect. The price system provides a simple scale by which competing demands may be weighed by every consumer or producer.
Prices can be determined in different ways. For example, the prices of meat, cotton and other agricultural prices can be decided in large central market where forces of supply and demand exist. This is pure price competition. The prices on industrial products (iron, steel, etc.) are usually decided by large companies. As a rule the amount and price of goods sold to large number of buyers is controlled by a few competing sellers. Prices also can be set by the government, usually for different public services - railroads, electricity, manufactured gas, bus services, etc.
Active Vocabulary
| to acquire | |
| credit terms | |
| trade- in allowance - | , |
| salable | |
| supply and demand - | |
| price competition - |
Comprehension Questions
1. Why is it difficult to determine the right price?
2. What is the function of prices?
3. In what way are agricultural prices decided?
4. How are industrial products usually priced?
5. Why does the government usually set the prices for public utility services?
6. Why is it so important to know the levels of supply and demand when dealing with pricing?
Vocabulary Practice
Exercise 1. Put the necessary word in the sentence.
1. It is very difficult... without sound price policy.
2. Of course we are interested in producing the... with the lowest unit costs.
3. I decided to buy a new car at this company because they offered the best... on my old model.
4. The... of this store are very beneficial for a customer.
5. Their business will fail if they pursue unsound....
6. The government usually... for public utility services.
7. In pure competition the forces of... operate.
Supply and demand, volume of sales, trade-in allowance, to compete, price policies, credit terms, to set prices
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Dialogue
Read the dialogue and discuss with your partner what type of pricing policy is better.
Dick is introducing a new line of products and is talking to his friend Tom a business consultant, about it.
Dick: It's the first time when I'm in business for myself.
Tom: Don't worry. The store has always been doing well. It has a great location and as far as your new line of merchandise...
Dick: That's what I wanted to talk to you about. Can you give some ideas how to charge the prices?
Tom: With pleasure. Generally, there are two types of pricing policies. There is price emphasis and price de-emphasis.
Dick: What's the difference?
Tom: The price emphasis policy emphasizes low prices. This encourages sales. But low price doesn't give extra services.
Dick: So, a really low price means no credit, home delivery, repair, installation and other services.
Tom: That's what I mean. But many people are interested only in the low price and not in the extra services.
Dick: Yes, and vice versa. The price which I set determines the number of sales. I must think thoroughly about it.
Tom: A good example of price emphasis is " loss leader " pricing. It means that you choose one item - let's say an electric razor - at a price just above the cost. The customers will come to your shop to buy this loss leader item. But since they are inside they can decide to buy a few other things they need.
Dick: It sounds interesting. What other things can you tell?
Tom: There is also off-even pricing. Let's say you sell a tape recorder for $ 69.95 instead of $ 80.00. Though it is fact about the same, the low price can produce a favorable psychological effect.
Dick: What are the other ways to attract the customers?
Tom: First of all, remember that you are going to compete with well-known products, so you should start with especially low prices. Its important to advertise this. You should use newspaper ads, maybe a radio spot, maybe do a big window and floor display.
Dick: It makes sense.
Tom: And you can raise the price after your customers try a new brand get to know it and like it. They will continue to buy it.
Dick: I see and what is the price de-emphasis you mentioned before?
Tom: It concerns high quality expensive items. Price de-emphasis means that you don't call attention to the price at all.
Dick: I know, it concerns our fine jewelry department or designer fashions.
Tom: Yes I see you are going to do very well.
Dick: Your suggestions seem to be very useful. Don't forget you have a discount on any shopping you do in my shop.
Tom: In such a case I'll be back tomorrow with my wife.
Active Vocabulary
| location- | |
| extra services- | |
| installation services- | |
| to charge prices- | |
| price emphasis- | |
| price de-emphasis- | , |
| loss-leader item- | , , |
| off-even pricing- | , |
| favorable psychological effect- | |
| to start with especially low prices- | |
| new brand- | |
| high quality expensive item- |
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Vocabulary Practice
Exercise 1. Change the sentences according to the model.
Model: The tape recorder is inexpensive. Your store sells the tape recorder.
The tape recorder that your store sells is inexpensive.
1. The dresses are fashionable. The store introduced the new dresses last week.
2. The store has many refrigerators. Dick owns the store.
3. The stereo is high-priced. My daughter wants the stereo.
4. The price determines the number of sales. A retailer sets the price.
5. Very often the people don't want extra services. Many supermarkets offer extra services.
6. Your shop should have loss-leader item. Loss-leader item will attract the customers.
Exercise 2. Change the sentences according to the model.
Model: We won't introduce a new line of merchandise unless you suggest it. We will introduce a new line new line of merchandise if you don't suggest it.
1. Tape recorders are popular unless the price is too high.
2. The consumers will continue to buy unless they don't like the item.
3. The buyer can get installation services unless he wants to pay for it.
4. The salesman will help you unless he is too busy.
5. People won't try a new product unless there is advertising.
6. Customers won't buy the new brand, unless the price is low.
7. They wont raise the price unless it is necessary.
Exercise 3. Answer the questions.
1. What is your idea of the term market price?
2. What type of pricing policy works with the majority of consumer goods? (Price-emphasis, price de-emphasis)
3. What is more preferable for you in pricing: low prices with no extra services or high prices with home delivery, repair and other services?
4. Why is it so important to have loss leader item in a shop?
5. What is off-even pricing made for?
6. How can your pricing policy help to compete with well Known products?
Exercise 4. Translate into English.
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Exercise 5. Set your imagination free.
You are a journalist and you are to interview the minister of finance about the pricing policy in this country. What questions would you ask him?
ACTIVE VOCABULARY
| abroad (adv) | |
| absolute liability | |
| account for (v) | -, |
| administrative assistant (n) | |
| administrator (n) | |
| advertise(v) | |
| advertising (n) | , |
| agency (n) | , |
| agent middleman (n) | |
| analyst (n) | |
| Annual Report (n) | |
| applicant(n) | |
| application (n) | |
| asset(n) | |
| assets and liabilities | |
| associate (n) | |
| association (n) | , |
| auditor (n) | , |
| authority (n) | , |
| benefits (o) | , |
| billing (n) | |
| bill of lading (n) | , |
| board of directors (n) | |
| bond(n) | , |
| borrower (n) | |
| brand (n) | , |
| brand-loyal (adj) | |
| bureaucracy (n) | , |
| bureaucratic (adj) | |
| business consultant (n) | |
| buyer(n) | |
| capital (n) | |
| capital surplus(n) | |
| cash register (n) | , |
| ath on (caught) (v) | |
| chain movement (n) | |
| chain of command (n) | |
| chain of distribution (n) | () |
| charge (v) | , |
| charitable (adj) | |
| charter (n) | |
| chartered (adj) | |
| checking account (n) | |
| classified section (n) | , |
| claim (n) | , |
| commercial bank (n) | |
| comission (n) | |
| common stock (n) | |
| compete (v) | |
| competent (adj) | |
| competition (n) | , |
| competitiveness (n) | , |
| comptroller (controller) | , |
| consumer (o) | |
| coordinate (i) | , |
| corporate finance (n) | |
| corporation (n) | , |
| credit (n) | |
| credit (v) | |
| creditor (n) | |
| credit reference letter (n) | , |
| credit terms (n) | |
| currency (n) | , |
| customer (n) | |
| data (n) (pl) | |
| data processing (n) | |
| deal (v) (dealt) | , |
| debt(n) | |
| debt funding (n) | |
| delivery (n) | |
| department (n) | , |
| department store (n) | |
| digit(n) | , |
| discount(n) | , |
| discount house(n) | , |
| display (n) | , |
| distribute (v) | , |
| distribution (n) | |
| diversified (adj) | |
| dividend(n) | , |
| document (n) | |
| draft (bank) | , |
| efficient (adj) | |
| eligible (adj) | , |
| employment agency (n) | |
| enterprise (n) | , |
| equipment (n) | |
| equity funding (n) | |
| exchange (n) | , , |
| expand (v) | |
| expertise (n) | , |
| export (v) | |
| extensive (adj) | |
| face value (n) | |
| finance (n) | , , |
| finance (v) | , |
| financial (adj) | , |
| financial statement (n) | |
| financing (n) | |
| finding (n) | , |
| fire (v) | |
| fiscal year (n) | () |
| foreign exchange | |
| franchise (n) | , |
| general partnership (n) | |
| global company (n) | |
| goods (n) (pl) | , |
| gross (adj) | , , |
| gross income (n) | |
| guarantee(n) | , , |
| have an interest in a business | |
| head buyer (n) | |
| hire (v) | , , |
| hire purchase (n) | |
| home industry (n) | |
| import (v) | , |
| income (n) | , |
| income statement (n) | |
| income tax (n) | |
| incorporate (v) | , |
| indirect channel (n) | |
| inflow (n) | , |
| institution (n) | , |
| insurance (n) | , |
| international exchange (n) | |
| international money (n) | (.) |
| invest (v) | , |
| investment (n) | , , , , |
| investor (n) | |
| issue (v) | , |
| joint account (n) | |
| joint bonds (n) | () |
| joint venture (n) | |
| legal (adj) | , , |
| legal tender (n) | |
| lending (adj) | , , |
| lending (n) | , , , , |
| letter of credit (n) | , |
| liability (n) | |
| liability for damages (n) | |
| liable (adj) | , - |
| liable to income tax | |
| line (n) | , |
| line of credit (n) | |
| line position (n) | |
| loan(n) | , |
| loan-bank | |
| loan certificate | |
| loan holder (n) | |
| loan-society | |
| manage (v) | , |
| management (n) | , , |
| manager (n) | , , |
| manufacture (v) | |
| manufacturer (n) | , |
| manufacturing water (n) | |
| market (v) | , , |
| marketing (n) | , |
| marketing research (n) | |
| market price (n) | |
| market-value (n) | |
| market-rate | |
| merchant (adj) | , |
| merchant law (n) | |
| monetary (adj) | , |
| multinational corporation (n) | |
| negotiable securities | |
| negotiate instrument (document)(n) | |
| negotiable copy (n) | |
| negotiate (v) | , , , |
| negotiate a loan | |
| negotiate a sale | |
| net (adj) | |
| net assets (n) | |
| net cash (n) | |
| net cost(n) | |
| net proceeds (n) | |
| net surplus | |
| net worth (n) | |
| net(v) | () |
| nonprofit (adj) | , |
| note (n) | , , , |
| notes in circulation (n) | |
| notes payable | |
| note receivable | |
| off-even pricing (n) | , |
| officer (n) | , |
| operations on the stock | |
| exchange order (n) | , , , , , |
| order payable at sight | |
| organizational chart | () |
| outflow (n) | () |
| packaging (adj) | , |
| paper work(n) | , |
| partnership (n) | , , |
| patent (n) | |
| paycheck(n) | |
| personnel (n) | , |
| personnel office (n) | |
| plant (n) | , , |
| portfolio (n) | , , (.) ( ..) |
| position (n) | , |
| predict (v) | , |
| preferred debt (n) | , |
| place an order (v) | , |
| preferred dividend | |
| preferred share | , |
| preference (n) | |
| pressure (n) | , |
| price de-emphasis (n) | , |
| price emphasis (n) | |
| price leader (n) | , |
| price sensitive (adj) | |
| prime cost (n) | |
| prime rate (n) | , |
| procedure (n) | , , |
| product(n) | , |
| product development (n) - | |
| production of commodities | |
| product planning (n) - | |
| profit (n) - | |
| profit and loss statement | |
| profit and loss account | |
| profitable rate of exchange - | |
| promote (v) - | |
| promote an undertaking | |
| promoters' shares - | |
| proprietorship (n) - | |
| prospective (adj) - | , |
| purchase (n) - | |
| purchase order (n) - | , |
| quote (n) - | |
| raise (n) - | , ( ) |
| ratio analysis (n) - | |
| receipt (n) - | , , , |
| receipt and expenditure (expenses) | |
| receptionist (n) | , |
| red tape (n) - | , , |
| report (n) - | , , |
| report(v) | , |
| research (n) | , |
| research (v) | |
| Research and Development (n) | |
| resources (n) (pi.) | , , |
| retailer (n) | , |
| retailing (n) | |
| Return of Investment | |
| Ratio (n) rights (n) | , |
| safety deposit box(n) | |
| salary (n) | , |
| sales (n) (pl.) | |
| sales check (n) | |
| sales clerk (n) | |
| savings account(n) | |
| services (n) (pl.) | |
| share (n) | , |
| short term loan (n) | |
| silent partner (n) | , |
| single line retailer (n) | , |
| span of control(n) | |
| staff position (n) | |
| statement (n) | , , |
| statute (n) | , |
| stock (n) | , , |
| stock (v) | , , |
| stockbroker (n) | |
| stockholder (n) | |
| subordinate (n) | |
| sue (v) | |
| superior (n) | , |
| supervise (v) | , |
| supply and demand (n) | |
| take title (v) | |
| tax (n) (pl. taxes) - | |
| terminal (n) - | , , |
| trade-in allowance(n) - | , |
| traffic (n) - | , |
| transaction (n) - | , |
| transmission (n) - | , |
| trend (n) - | , |
| union (n) - | , , |
| unit cost (n) | |
| unlimited liability (n) - | |
| utility (n) - | , |
| utility services (n) - | |
| vending machine (n) - | |
| volume (n) - | , , |
| vote (v) - | |
| warehousing (n) - | |
| wholesaler (n) - | |
| wholesaling (n) - |
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1. , .. : / ...- : , 1999.- 60 .
2. , .. - / .. . - .: , 2005. - 620.
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