10. Pricing Flashcards
(23 cards)
Price
The amount of money charged for a product or service, or the sum of the values that customers exchange for the benefits of having or using the product or service.
Major Pricing Strategies
Customer Value-based Pricing, Cost-based pricing, Competition-based pricing
Customer Value-based pricing
Setting price based on buyers’ perceptions of value rather than on the seller’s cost. Assess customer needs and value perceptions, Set target price to match the last one, Determine costs that can be incurred, Design the product to deliver desired value at target price.
Good-value pricing
Offering the right combination of good quality and service at a fair price. (Everyday low pricing, High-low pricing)
Value-added pricing
Attaching value-added features and services to differentiate a company’s offers and charging higher prices.
Cost-based pricing
Setting prices based on the costs of producing, distributing, and selling the product plus a fair rate of return for effort and risk. (Costs at Different Levels of Production, Costs as a Function of Production Experience, Cost plus pricing, Break-Even pricing (Target profit pricing))
Fixed costs
Costs that do not vary with production or sales level.
Variable ocsts
Costs that vary directly with the level of production.
Total costs
The sum of the fixed and variable costs for any given level of production.
Experience curve (;earning curve)
The drop of the average per-unit production cost that comes with accumulated production experience.
Cost plus pricing (markup pricing)
Adding a standard markup to the cost of the product.
Break-Even pricing (Target profit pricing)
Setting price to break even on the costs of making and marketing a product or setting price to make a target return. As the price increases the break even volume drops.
Competition-Based pricing
Setting prices based on competitors’ strategies, prices, costs, and market offerings.
Internal factors influencing price decisions
Overall Marketing strategy, objectives and mix of the company, Organizational Considerations
Target costing
Pricing that starts with an ideal selling price, then target costs that will ensure that the price is met.
The Market and Demand
Pricing in different types of markets, analyzing the price-demand relationship, price elasticity of demand
External factors
The market, demand and the conomy
Pricing in different types of markets
Pure competition, monopolistic competiton, oligopolistic competition, pure monopoly
Pure competion
Many buyers and sellers trading in a uniform commodity, do not have much effect on the market price.
Oligopolisitc competition
Only a few large sellers, affected by competitors’ prices.
Monopolistic competition
Many buyers and sellers trading over a range of prices, differentiated products, less affected by competitors pricing.
Demand curve
A curve that shows the number of units the market will buy in a given time period, at different prices that might be charged.
Price elasticity
A measure of the sensitivity of demand tochanges in price.
