chapters 10 & 11 Flashcards
What is price?
amount of money charged for a product or service, major factor affecting buyer choice
What are the three primary pricing strategies?
customer-value
cost-based
competition-based
What are the two types of value-based pricing? Know some examples.
starts with what consumers value and choose a price to meet this subjective value
good-value pricing
value-added pricing = add competitive features
What is the difference between fixed and variable costs? Know examples of each.
- Fixed costs are those that do not change with production or sales levels. (EX: bills for rent, AC, salaries)
- Variable costs vary directly with level of production. (EX: costs of materials used and the amounts used. Wires, screens, chips, in an iPad)
How do manufacturing costs vary with production levels and manufacturing experience?
as a company increases outputs, they still pay the same fixed costs
What is market-skimming pricing?
setting a high price for a new product to skim maximum revenues layer by layer from the segments that are willing to pay the high price
What is market-penetration pricing?
setting a low price for a new product in order to attract a large number of buyers and a large market share
What are product mix pricing strategies? Know some examples.
product line: setting prices across an entire product line
optional product: pricing optional or accessory products sold with the main product
captive product: pricing products that must be used with the main product (ex. nintendo switch and their games)
by-product:pricing low-value by-products to get rid of or make money on them
product bundle: pricing bundles of products sold together
