Chapter 10 Flashcards
Price
The amount of money charged for a product or service, or the sum of the values that customers exchange for the benefits of having or using the product or service
What are the 3 major pricing strategies?
Customer value based pricing
Cost based pricing
Competition based pricing
Customer value based pricing
Involves setting the price based on buyer’s perceptions of value rather than on the seller’s cost
A company starts with assessing customer needs and value perceptions
Good value pricing
Involves offering the right combination of quality and good services to differentiate a company’s offers and charging higher prices
Cost based pricing
Involves setting prices based on the costs of producing, distributing, and selling the product plus a fair rate of return for effort and risk
What are the 2 forms of costs?
Fixed costs
Variable costs
Fixed costs
Costs that do not vary with production or sales level
Variable costs
Costs that vary directly with the level of production
What is the simplest cost based pricing?
Cost plus pricing (markup pricing)
Cost plus pricing (markup pricing)
Adding a standard markup to the cost of the product
Break even pricing
Where a price is set to break even on the costs of making and marketing a product or a price is set to make a target return
Competition based pricing
Involves setting prices based on competitors strategies, prices, costs, and market offerings
What are other factors that affect pricing decisions?
The overall marketing strategy
Organisational considerations
The market and demand
The economy
Other external factors, such as resellers, government, and social concerns
