Transcript Price Chapter

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Costs & Expenses
Supply and Demand
Consumer Perceptions
Competition
Technological Trends
Government Regulations
 Price gouging: price above mkt. when there is no
alternative
 Price fixing: illegal; competing companies agree to restrict
prices in a specified range
 Resale Price Maintenance: price fixing imposed by
manufacturer
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Cost-based pricing: consider you business cost
and profit objectives
Demand-based pricing: find out what customers
are willing to pay
Competition-based pricing: find out what
competitors charge
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Flexible-price policy: allow customers to bargain
One-price policy: all customers are charged
same price
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Intro.—sales are low, marketing costs are high,
profits are low
 Price skimming—charge high price to recover costs
 Penetration pricing-build sales by charging low initial price
to keep cost low for customer
• Growth—sales climb rapidly, unit costs decrease, profits
begin, competitors enter the market
• Maturity—sales slow and profits peak; profits fall off as
competition increases.
• Decline—sales and profits fall; business cut prices to
generate sales or clear inventory
Psychological Pricing
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Prestige pricing
Odd/even pricing
Price lining
Promotional pricing
Multiple-unit pricing
Bundle pricing
Discount Pricing
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Cash discounts
Quantity discounts
Trade and Promotional Discounts
Seasonal Discounts
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Break-even point: point at which the product
price covers costs; gives you an idea on the
number of units you must sell to make a profit
Formula: (fixed cost divided by unit selling
price)- variable costs=break even point in units
Markup: amount added to cost of product to
cover expenses and ensure a profit
Cost+Price=Markup
Markup / Cost=percentage markup on cost
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Standard Markup: use a standard markup
percentage
Markdown: lowering price a certain percentage
Discounts