Survey
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
Pricing Methods • Cost-based pricing – The seller determines the total cost of producing one unit of the product then adds an amount to cover additional costs and profit (markup) – Markup may be calculated as a percentage of total costs – Flaws • Difficulty of determining an effective markup percentage; price may be too high, resulting in lost sales, or price may be too low, resulting in lost profit • Separates pricing from other business functions that impact marketing decisions Copyright © Cengage Learning. All rights reserved 13 | 1 Pricing Methods • Breakeven analysis – Breakeven quantity • The number of units that must be sold for total revenue (from all units sold) to equal the total cost (of all units sold) – Total revenue • The total amount received from sales of a product – Fixed cost • A cost incurred no matter how many units are produced or sold – Variable cost • A cost that depends on the number of units produced – Total cost • The sum of the fixed costs and the variable costs attributed to a product Copyright © Cengage Learning. All rights reserved 13 | 2 Breakeven Analysis • What is the lowest level of production and sales at which a company can break even on a particular product? Copyright © Cengage Learning. All rights reserved 13 | 3 Pricing Methods (cont’d) • Demand-based pricing – Based on the level of customer demand for the product – Product prices are high when demand is high and low when demand is weak – Price differentiation • Setting different prices in segmented markets based on segment characteristics (e.g., time of purchase, type of customer, or distribution channel) • Competition-based pricing – Based on meeting the challenge of competitors’ prices in markets where products are quite similar or price is an important customer consideration Copyright © Cengage Learning. All rights reserved 13 | 4