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price
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amount of money charged for a product or service of the four Ps it is the most flexible and the only one that produces revenue
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Major Pricing Strategies
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customer value-based pricing, cost-based pricing, and competition-based pricing
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customer value based pricing
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user buyers perception of value not the sellers cost, set the price to match the value before you set the cost
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good value
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offer the right combination of quality and good service at a fair price
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everyday low pricing
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involves charging a constant everyday low price with few or no temporary price discounts
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high low
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run higher prices but you can discount more often
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value-added
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attaching value added features and services to differentiate and support higher prices
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cost-based pricing
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when you set prices based on producing, distributing, and selling plus a fair rate of return for effort and risk
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fixed costs
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do not vary with production or sales level
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variable costs
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costs that vary with the quantity of output produced
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total costs
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the sum of the fixed and variable costs for any given level of production
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Cost-plus pricing (markup pricing)
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adding a standard markup to the cost of the product
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Break-even (target return) pricing
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setting price to break even on the costs of making and marketing a product, or setting price to make a target return
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competition-based pricing
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when the price is based on competitor strategies, prices, costs, and market offerings
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Pricing in Different Types of Markets
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pure competition, monopolistic competition, oligopolistic competition, pure monopoly
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pure competition
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many buyers and sellers trading in a uniform commodity where no single buyer or seller has much effect on the going market price, no buyer or seller can affect the price
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monopolistic competition
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the market consists of many buyers and sellers trading over a range of prices rather than a single market price
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oligopolistic competition
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the market consists of only a few large sellers, they are alert to each other, price is a major tool
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pure monopoly
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the market is dominated by one seller
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demand curve
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shows the number of units the market will buy in a given time period at different prices that might be charged
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price elasticity
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a measure of sensitivity of demand to change in price, demand does not change
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