ch 10 Flashcards
buyer perceptions of cost
price is considered against the total perceived costs (monetary and non monetary)
seller
price has to include not just the cost of making the product but also a portion of all the other costs associated with being in business
influences of price setting
customer perceptions or expectations
internal costs
market characteristics
competition
variable costs
vary based on the number of products produced and sold
fixed costs
same cost regardless of number of units produced and sold
variable and fixed cost formula
total cost = variable cost + fixed cost
break even formula
BEP=Fixed Cost/Selling Price-Variable Cost
skimming strategy
setting an initially high price and using gradual timed price drops to make as much profit as possible over time by maximizing how much you make from each sale
penetration pricing
defined as introducing a new product at a relatively low price with the intention of establishing a large market share before competitors can establish themselves
cost based pricing
set price based on company costs
value based pricing
set price based on what customers are willing to pay
static pricing
prices are relatively stable over time
dynamic pricing
adjust price constantly to match availability, competitive prices and customer demand
setting a base price steps
set pricing objectives
estimate demand and revenue
determine cost, volume, and profit relationship for different price points
analyse competitors prices, offers and value propositions
sest the initial base price
adjust to set the final price
demand estimation
market potential - size of market
estimate demand for your product
price sensitivity and price elasticity of demand
