9 Pricing Flashcards
Perceived Benefits / Price
Value
Profit =….
Total revenue - Total cost
Approximate price level categories
Demand oriented
Cost oriented
Profit oriented
Competition oriented
Factors underlying expected customer demand
Demand oriented approach
Setting the highest possible price customers will pay
skimming pricing
Setting a lower price on a new product to appeal to the mass asap
Penetration pricing
Setting a high price to attract
Prestige pricing
Price lining
Selling a product line
ex. ipads
Odd even pricing
649 vs 650
Target pricing
Maximum willing price of customers
MINUS how much products are costing them
two or more products for cheaper price
Bundle pricing
Changing of price based on the time
Yield management pricing
Cost oriented
Price is set by looking at production costs
Profit oriented
Setting a target dollar amount of profit
Target Profit pricing
Annual target of a specific dollar amount of profit
Profit equation (target profit)
Profit = Total revenue - total costs
Competition oriented approach
Based on analysis of what competitors are doing
Customary pricing
Competitive factors, tradition, channel of distribution
ex. vending machine prices
above, at, bellow pricing
where the price of a product is positioned compared to market average
Loss-Leader Pricing
Pricing common products lower than what they cost to sell
ex. selling a console so in the future you make profit on games
ROI
Return on investment, Profit achieved compared to the investment
roi%= (profits increase - investment)/Investment
Demand curve
number of products to be sold at given price
Pricing decisions (3)
Total cost
fixed cost
variable cost
Break even analysis
Break even point is reached when total revenue = total cost
(fixed cost)/ (Unit price - Unit variable cost)
