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CA (168,376)
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MGTA02H3 (363)
Chapter 7

Chapter 7 textbook notes

5 Pages
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Department
Management (MGT)
Course Code
MGTA02H3
Professor
Chris Bovaird

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Chapter 7
·Pricing objective: goal that producer hope to get in pricing product for sale
Profit max objective: too low may miss opportunity of extra profit, too high may cause excess
inventory and reduce production
includes: labour, material, capital equipment, cost of marketing
pricing for e-business objective: lower cost because no intermediate and compare competitor
prices
market share objective: low price to establish market share
market share: companys percentage of total market sales for a specific product
other objectives: when in a recession, company want to survive
·price setting tools: identify prices allow company to reach to objective
cost oriented pricing: consider desire to make profit and cover all cost
Markup percentage= markup
Sales price
markup percentage is 30, imply that 30 cents will be gross profit
·Break even analysis: cost volume profit relationship
variable cost: change with the number of goods product and sold
fixed cost: unaffected by the amount produced
Break even analysis: assessment of how many must be sold at given price before to make a profit
break even point: the number of unit must be sold at given price before cover variable and fixed
cost
BEP (unit) = total fixed cost
Price – variable cost
·Pricing strategies:
pricing existing product: pricing above prevailing market price imply higher quality, below imply
acceptable quality
Pricing leadership: dominant firm in the industry establish price and other follow
(ex: gas differ little in quality, compete through advertisement or personal selling, not price)
Pricing fixing: illegal process of producer agree what price
www.notesolution.com
pricing new product
price skimming: initially high price to cover cost and profit
penetration pricing: initial low price to sell more and customer loyalty
·Pricing tactics: ways in which manager implement firms pricing strategies
price lining: offer all item in certain categories at limited number of predetermine price point (5,
10, 15, all 10)
Psychological pricing: setting price to take advantage of non-logical reaction of customer to type
of prices
Odd even pricing: price are not stated in even dollar (9.95)
Discounting price reduction to persuade customer to buy
cash discount: customer paying cash (not on credit), pay lower price
seasonal discount: when sale are low during that season
trade discount: buying large amount of product
·Dumpling: price lower than foreign market than in its domestic market
·Distribution mix: combination of distribution channel, get product to end user
·Intermediaries: individual or firm (not producer) in product distribution
wholesaler: sell product to other business, then to customer
retailer: sell product to end users
·distribution channel: path that product follow from producer to end user
C1 Direct channel: product travel from producer to consumer (on intermediaries) (ex: internet)
C2 Retail distribution: distribute through retailer (need large amount floor space)
C3 Wholesale distribution: add wholesaler to C2 (storage function) (ex: gas station)
C4 Sales agents/Broker add to C3: represent producer sell to wholesaler, retailer and get
commission, dont take legal possession of the product (ex: travel agent)
Non-direct distribution:
high price (markup cost)
add value: save customer time and money
C5 Agent to consumer or business: agent as a sole intermediary
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Description
Chapter 7Pricing objective goal that producer hope to get in pricing product for saleProfit max objective too low may miss opportunity of extra profit too high may cause excess inventory and reduce production labour material capital equipment cost of marketingincludespricing for ebusiness objective lower cost because no intermediate and compare competitor pricesmarket share objective low price to establish market sharemarket share companys percentage of total market sales for a specific productother objectives when in a recession company want to surviveprice setting tools identify prices allow company to reach to objectivecost oriented pricing consider desire to make profit and cover all costMarkup percentagemarkupSales pricemarkup percentage is 30 imply that 30 cents will be gross profitBreak even analysis cost volume profit relationshipvariable cost change with the number of goods product and soldfixed cost unaffected by the amount producedBreak even analysis assessment of how many must be sold at given price before to make a profitbreak even point the number of unit must be sold at given price before cover variable and fixed costBEP unit total fixed cost Pricevariable costPricing strategiespricing existing product pricing above prevailing market price imply higher quality belowimplyacceptable qualityPricing leadership dominant firm in the industry establish price and other followex gas differ little in quality compete through advertisement or personal selling not pricePricing fixing illegal process of producer agree what pricewwwnotesolutioncom
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