6 - Pricing and Profitability Flashcards
what is cost-plus pricing?
an approach to pricing custom p/s that involves calculating product costs and adding desired profit margin
what is long-run cost?
estimated sum of all resources committed to a p/s in the long run
what is penetration pricing policy?
a pricing approach that involves charging low prices initially to gain rapid acceptance of product into the market
who are price setters?
firms that have some discretion over setting p/s prices
who are price takers?
firms that have no influence on price setting
what is a price-skimming policy?
an approach to pricing that attempts to exploit market sections that are relatively insensitive to price changes
what is product life cycle?
period of time from initial expenditure on research and development to withdrawal of cust support
what is target costing?
technique that focuses on managing costs during a product’s planning and design phase by establishing target cost for p/s that is derived from target SP less desired profit margin
what must be considered when pricing products?
- price must exceed cost
- type of product (will influence price that can be charged)
- competition and company position in the market
- demand and elasticity
- cost-plus pricing
- breakeven position of the company
- type of pricing appropriate for circumstances
four stages of product life cycle?
introduction
growth
maturity
decline
what is oligopoly?
a few large firms in the market
