MKT 100 Lecture Notes - Lecture 13: Profit Maximization, Status Quo, Cost Estimate

• School: Ryerson University
• Department: Marketing
• Course: MKT 100
• Professor: Golam Aurup

Document Summary

Chapter 13 setting the right price (13-2) the four-step pricing process. Estimate costs, profit & demand: cost estimation, variable & fixed cost, profit, demand estimation, historical data in the industry, plc analysis, price sensitivity and price elastic of demand. Break-even analysis: how much does it cost to bring the product to market, how much is the market willing to pay for the product, bep = fixed cost / (variable price per unit - variable cost per unit) Recover production costs quicky; test the market at a high price and then lower if sales too slow; better to go in high and reduce then go in low and increase. Price-sensitive market; demand is elastic; competitive market, homogeneous products, potentially large market; low fixed-cost structure; each sale contributes large amount to fixed cost. Simple; but it ignores demand and costs. Markup - profit-producing device of price; a component of each pricing tactic.