This page contains the most common pricing terms.
|
Term |
Description |
|---|---|
|
Product Costs |
The cost of production.
|
|
Quantity/Volume |
The amount of product sold. |
|
Margin |
The product's price minus cost; margin is usually the key profitability indicator. |
|
Target Margin |
The amount of profit expected to be received from a product sold. |
|
Purchase Price |
The acquisition costs of the product that is produced somewhere else. |
|
Price Indexes |
Price variation that is market- and material-related (example: oil, grains). |
|
Competition Price |
The price of a competitor with a similar product. |
|
Packaging Price |
The price of packaging, which is counted as an extra cost. |
|
Stock |
Inventory of the product. |
|
SKU |
Stock-keeping unit. |
|
Transportation Costs |
The costs to move products. |
|
Floor Price |
Lowest price calculated based on profitability. |
|
Price Ceiling |
The highest price for selling a product. |
|
Distributor Price |
Wholesale price in B2B businesses (example: manufacturer sells tires to distributors). |
|
Bottom-up Pricing |
Method in which all the costs are calculated first, and the desired profit is added to the total cost to calculate the price. |
|
Top-down Pricing |
Method in which the price is calculated based on the perceived value of the product by the customer and then pushed down. |
|
Global Pricing |
Global price setting that is applicable for all business units. |
|
Local Pricing |
Regional price setting that comes on top of the global pricing. |
|
Product Life Cycle |
Product life stages reflected mostly in sales: introduction, growth, maturity, decline. |
|
Pocket Margin |
Final margin (profit before taxes). |
|
Margin Leakage |
Areas where the company loses money. |