MKBU 3225 Chapter Notes - Chapter 10: Sales Promotion, Monopolistic Competition, Demand Curve
3 Nov 2016
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Document Summary
Customer perceptions of product"s value sets ceiling for price while product costs set floor for price. Good-value pricing: offering just right combo of quality & good service @ fair price. Value-added pricing: attaching value-added features & services to differentiate company"s offers & charging higher prices. Types of costs: fixed costs (overhead): costs that don"t vary w/ production/sales level, variable costs: costs that vary directly w/ level of production, total costs: fixed costs + variable costs. Costs as function of production experience: average cost tends to decrease w/ accumulated production experience, experience curve (learning curve): drop in average per unit production cost that comes w/ accumulated production experience. Break-even analysis & target profit pricing: break-even pricing (target return pricing): setting price to break even on costs of making & marketing product/setting price to make target return. Competition-based pricing: setting prices based on competitors" strategies, prices, costs, & market offerings. Other internal and external considerations affecting price decision.
