Entr class 12 Flashcards
Price sends important…
signals to customers: quality, prestige, uniqueness
Common small business mistake
charge too low, fail to recolonize their value
Competition and pricing
take into account competitors price but not match price, differentiate products & service. Stay out of price wars.
“right” price
depends on value it provides consumer
Two aspects of price: objective value
perfect customer understanding
Two aspects of price: perceived value
determines the price customer is willing to pay
Three goals of introducing a new product
- getting product accepted
- maintaining market share as competition grows
- earning a profit
pricing strategy: penetration
set prices below competitors to gain market entry. grows market share
pricing strategy: skimming
set higher prices for new product and for market with little or no competition.
Pricing strategy: life cycle pricing
set higher prices initially for new product, and as technological advance or additional experience enables the firm to lower cost.
absorption costing
traditional method of product cost, manufacturing & overhead costs are absorbed into products total cost
variable or direct costing
product costing method that includes in the products cost only those cost that can vary directly with quality produced
contribution percentage
what portion of the selling price is available after covering variable costs to meet fixed expense & profit.
break even point
zero profit, lose zero money
