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Team-Based New Product Development
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Company departments work closely together in cross-functional teams, overlapping steps in the product-development process to save time and increase effectiveness
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price
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sum of all the values that customers give up in order to gain the benefits of having or using a product or service
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customer value based pricing
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uses buyers' perceptions of value, not the seller's cost, as the key to pricing
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good value pricing
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involves offering just 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 pricing
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involves charing higher prices on an everyday basis but running infrequent promotions to lower prices temporarily on selected items
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value-added pricing
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the strategy of attaching value-added features and services to differentiate their offers and thus support higher prices
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impact of lower cost on prices
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Low cost suppliers offer lower prices with lower margins but higher sales and profits
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types of costs
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fixed costs, variable costs, total costs
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Fixed costs (overhead)
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costs that do not vary with production or sales level
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variable costs
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vary directly with the level of production. total varies with the number of units 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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learning curve (experience curve)
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the drop in average cost with accumulated production experience
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target costing
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starts with an ideal selling price based on customer-value considerations, and then targets costs that will ensure that the price is met
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SHORT ANSWER break even analysis
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break even= fixed costs/ contribution (price-variable costs)
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demand curve
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shows the relationship between the price charged and the resulting demand level
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price elasticity
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how responsive demand will be to a change in price
- if demand hardly changes with a small change in price, demand is inelastic
- if demand changes greatly with a small change in price, demand is elastic
- if demand hardly changes with a small change in price, demand is inelastic
- if demand changes greatly with a small change in price, demand is elastic
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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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market consists of many buyers and sellers trading in a uniform commodity, no single buyer or seller has much effect on the going market price
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monopolistic competition
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market consists of many buyers and sellers who trade over a range of prices rather than a single market price, a range of prices occurs because sellers can differentiate their offers to buyers
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oligopolistic competition
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market consists of a few sellers who are highly sensitive to each other's pricing and marketing strategies
- difficult for new sellers to enter the market
- difficult for new sellers to enter the market
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