Pricing Flashcards
(11 cards)
What factors are considered to make pricing decisions?
Internal factors: production costs, desired profit margins, and their overall marketing strategy
External factors: market demand, competitor pricing, and the economic climate.
Prestige Pricing
Prestige Pricing: Setting higher-than-average prices to suggest status and high quality.
Promotional Pricing
Promotional Pricing: Lowering prices temporarily to stimulate sales, often used in conjunction with sales promotions.
Odd-Even Pricing
Odd-Even Pricing: Setting prices slightly below a round number (e.g., $9.99 instead of $10) to create a perception of a bargain.
Cost-Plus Pricing
Cost-Plus Pricing: Calculating the cost of producing a product and adding a fixed percentage or dollar amount to determine the selling price.
Multiple-Unit Pricing
Multiple-Unit Pricing: Pricing items in multiples to suggest a bargain and increase sales volume (e.g., “3 for $1”).
How to calculate prices using markdown percentage and discounts?
- convert the percentage to a decimal
- multiply the original price by (1 - decimal markdown percentage)
How to evaluate pricing decisions?
- analyze costs, competitor pricing, customer demand, and perceived value
- test and adjust prices based on market reactions and sales data
Fixed cost
A fixed cost is a business expense that stays the same regardless of production or sales volume. These costs, often called overhead, must be paid even if a business isn’t actively producing or selling.
ex: Rent, Salaries, Property Tax, Depreciation, Loans
Variable Cost
A variable cost is a business expense that changes in direct proportion to the quantity of goods produced or services provided.
ex: raw materials, hourly wages, shipping, sales commission, utilities (water, electricity)
How to calculate the break-even point?
- Find the difference between the selling price per unit and the variable cost per unit
- Divide total fixed costs/overhead by that value
