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MGTA02H3 (361)
Chapter 7

Chapter 7 price.docx

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University of Toronto Scarborough
Management (MGT)
Chris Bovaird

Chapter 7: The 4 Ps – Price Variable costs: costs that change with the number of goods and services sold EX. 1 coffee = 1.99; 2 coffee = 1.99 (2) Fixed costs: costs that aren’t affected by the costs of goods and services sold EX. Equipment to make coffee, rent space, paying workers Break-even analysis: assessment to find the best number of goods or services that must be sold at a given price to make a profit Break even point (in units) = total fixed costs / [price – variable costs] Pricing Strategies & Tactics Pricing existing products  High prices: high quality EX. Godiva Chocolate  Low prices: acceptable quality EX. Budget rental car companies Dollar stores  Price leadership: dominant firm establishes a price and other companies follow along. They compete by using different advertising campaigns, personal selling, and service, not price EX. Gasoline companies Pricing new products  Price skimming: Making product really high priced to earn max. profit on each unit sold EX. HD TVs
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