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Price
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the amount of money exchanged for a good or service
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Customer value-based pricing
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setting price based on buyers' perceptions of value rather than on the seller's cost
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Good-value pricing
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offering just the right combination of quality and good service at a fair price
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Value-added pricing
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attaching value-added features and services to differentiate a company's offers and charging higher prices
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Cost-based pricing
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setting prices based on the costs of producing, distributing, and selling the product plus a fair rate of return for effort and risk
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Fixed Cost
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cost that does not vary with the quantity produced
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Variable Cost
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a cost that rises or falls depending on how much is produced
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Total Cost
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fixed costs plus variable costs
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Experience curve (learning curve)
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the decline in unit costs of production as cumulative output increases
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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 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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setting prices based on competitors' strategies, prices, costs, and market offerings
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target costing
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pricing that starts with an ideal selling price, then targets costs that will ensure that the price is met
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demand curve
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a graph of the relationship between the price of a good and the quantity demanded
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price eleasticity
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a measure of the sensitivity of demand to changes in price
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