ADM 2320 Lecture Notes - Lecture 11: Marginal Revenue, Value-Based Pricing, Sunk Costs
3 Aug 2017
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Value is critical; break even analysis is not a pricing approach. A food knows the price of everything, but knows the value of nothing. (cid:499) Price of the product comes with (cid:498)this is the value that people perceive of the product. (cid:499) (cid:498)what kind of value do people associate with (cid:494)experience(cid:495) when it comes to a cup of coffee? (cid:499) Tuition, rent, premium, fees, dues, fare, wage, interest. Bait and switch: illegal practice; advertising something inexpensive but then selling something more expensive. Canadian tire; you go there and the product is not there, so they give you a rain check. Expenditure is smaller vs. buyer(cid:495)s total income. Difficult to compare the quality of substitutes. Expenditure is small vs. total cost of the end product. Part of the cost is borne by another party. Product is viewed as quality, prestigious, or exclusive. The pricing range: from breakeven point, to cogs, to value pricing. Feasible range between value pricing to cogs.
