Chapter 6 Flashcards
WHAT MAKES SERVICE PRICING STRATEGY DIFFICULT.
- Harder to Calculate the costs of creating a service process or performance.
- Variability of inputs and outputs.
- Importance of time factor same service may have more value to the customer when delivered faster.
- Customer find service pricing difficult, risky and sometimes unethical.
OBJECTIVES FOR ESTABLISHING PRICES
Gain Profit
Cover Costs
Build Demand
Develop a User Base
Support Positioning Strategy
Support Competitive Strategy
Set prices relative to financial costs
Activity-Based Costing
Pricing implications of cost analysis
Cost-Based Pricing
Relate price to value perceived by customer
Value-Based Pricing
Monitor Competitors pricing strategy
Dependent on the price leader
Competition- Based Pricing
Is a pricing strategy where businesses set a selling price based on a product’s production, manufacturing, and distribution costs.
Cost-Based Pricing
Are economic asosts a supplier would continue to incur.
Fixed Costs
Refer to the economic costs associated with serving an additional customer, such as making an additional bank transaction or selling an additional seat on a flight.
Variable Costs.
fall in between fixed and variable costs. They represent expenses that rise or fall.
Semi-variable costs.
Is the difference between the variable cost of selling an extra unit of service.
Contribution
Allows managers to know at what sales volume a service will become profitable.
Breakeven Analysis.
is a strategy for pricing goods or service that adjusts the price based on its perceived value rather than on its historical price.
Value-based Pricing
This is used to increase revenue by increasing prices without a significant effect on volume.
Value-Based Pricing.
Which is the sum of all perceived benefits (gross value) minus the sum of all the perceived costs of the service.
Net Value.
Define the difference between the price customers pay and the amount they would actually have been willing to pay.
Consumer surplus.
