Quiz 2/24 Flashcards
Price
The amount of money exchanged fro products and services
Price vs. Value
Price is what the consumer pays
Value is what the consumer receives
Value Equation
Value = Perceived Benefits / Price
Six Steps in Setting Price
- Identify Pricing Objectives and Constraints
- Estimate Demand & Revenue
- Determine Cost, Volume, and Profit
- Select an Approximate Price Level
- Set the price
- Make special adjustments
Market Share equation
Firm’s Sales / Total Market Sales
Are necessities and luxuries inelastic or elastic?
Necessities are inelastic
Luxuries are elastic
Total Cost equation
Total Cost = Fixed Cost + Variable Cost
Contribution Margin equation
Contribution Margin = Price - Variable Cost
Breakeven Point equation
Breakeven Point = Fixed Cost / Contribution Margin
Approaches for selecting an approximate price:
Competition oriented
Cost oriented
Profit oriented
Demand oriented
Skimming Approach
High price to normal price (Ex. Apple)
Penetration Approach
Low price to increased price (Ex. Amazon)
Prestige Approach
High price, stays high (Ex. Rolex)
Factors that affect value and price customization:
Tastes
Nature of use
Intensity of use
Competition
Dynamic Pricing and what could go wrong
Changing the price frequently based on supply and demand.
Could lead to loss of trust and customers feeling used.
