Pricing Strategies Flashcards
Describe gross profit
Revenue minus the cost of goods sold
Describe net profit
Gross profit minus expenses
Revenue is the total income brought in through the sales of goods and services
List the 5 pricing goals
- Recovering costs
- Return on investment
- Competition pricing
- Higher profit margin
- Increase market share
Explain recovering costs
Make back what it cost to make the product
Explain return on investment
For every dollar the company puts into a project, the goal is to get the maximum return
Explain competion pricing
To meet or beat the competitors price
Explain higher profit margin
The difference between the expenses and the retail price, expressed as a percentage or dollar amount
Explain increasing market share
The percentage of the total sales of all companies that sell the same type of product
Define consumer perception
The relationship of price and quality in a consumer’s mind
Explain prestige pricing
Very expensive sports apparel will be priced well above that average market price to attract consumers who may judge a products quality by its price
Explain odd-even pricing
Pricing goods with either an odd number or and even number to match a products image
Odd priced items ($25.99) suggest a bargain
Even priced item ($100) may reflect quality and more expensive items
Explain target pricing
Pricing goods according to what the customer is willing to play
Describe the supply and demand theory
If a product is in high demand, and there is a limited supply, its price will be high and vice versa
Supply and demand theory is based on elastic demand
List the 4 situations where price will not affect a consumer’s demand
- Product is necessity
- No substitutes exist
- The price increase is not significantly relative to the consumers income
- Time constraints
