The amount of money charged for a product or service , or the sum of the values that consumer exchange for the benefits of having or using the product or service p266 Show “1% price improvement generates a 12.5% profit improvement for most organizations” 2) Factors to consider when setting prices * Value-based pricing - Value-based pricing: Setting price based on buyers’ perception of value rather than on the seller’s cost Customers → Value → Price → Cost → Product ①Good value pricing: Offering just right combination of quality and good service at a fair price ②Value added pricing: Attaching value added features and services to differentiate a company’s offers and to support charging higher prices. * Company and product costs - Cost-based pricing: Setting price based on the costs for producing, distributing, and selling the product plus a fair rate of return for effort and risk Product → Cost → Price → Value → Customers cf. cost-plus pricing vs. break-even pricing(target profit pricing) - Type of costs: fixed costs(overhead) + variable costs = total cost - To price wisely, management needs to know how its cost vary with different level of production - Experience curve(Learning curve): The drop in the average per unit production cost that comes with accumulated production experience. - break-even volume=fixed cost/(price-variable cost) * Other internal and external considerations affecting prices decisions ① Overall Marketing strategy, objectives, and mix ② Organizational considerations [조직 내 가격결정기구] ③ The market and demand -Oligopolistic competition: 경쟁사의 가격에 민감한 소수의 판매자. -Pure monopoly : 단 하나의 판매자. + Analyzing the price-demand relationship: demand curve + Price elasticity demand = (%change in quantity demanded )/ (%change in price) ④ Competitors’ strategies and prices - 고객 가치 측면에서 자사와 경쟁사의 비교분석 - 경쟁사의 가격전략과 그 강도 - 향후 고객의 가격민감도는 어떻게 변할 것인가?[ex.제품간 차별화↓→ 가격민감도↑] ⑤ Other external factors: economic conditions, market environment(reseller…) Chap 11. Pricing products 1) New-product pricing strategies * Market-skimming pricing: Setting a high price for a new product to skim maximum revenues layer by layer from the segments willing to pay the high price. The company makes fewer but more profitable sales * Market-penetration pricing: Setting a low price for a new product in order to attract a large number of buyers and a large market share 2) Product mix pricing strategies * Product line pricing: Setting the price steps between various products in a product line based on cost differences between the products, customer evaluations of different features and competitors’ price * Optional product pricing: The pricing of optional or accessory products along with a main products * Captive-product pricing: Setting a price for products that must be used along with a main product, such as blades for a razor and film for a camera * By-product pricing: Setting a price for by-products in order to make the main products price more competitive * Product bundle pricing: Combining several products and offering the bundle at a reduced price 3) Price adjustment strategies * Discount and allowance pricing - Discount: 가격 할인 - Allowance: 제조사가 판매사에게 판촉비용 지불 예) trade-in allowance(보상교환), slotting allowance(입점비) promotional allowance(판촉비) * Segmented pricing: Selling a product or service at two or more price, where the differences in prices is not based on differences in costs 예) 박물관 학생할인(customer), 극장의 좌석 요금차이(location), 에비앙 생수와 에비앙 스프레이(product) * Psychological pricing: A pricing approach that considers the psychology of prices and not simply the economics. The price is used to say something about the product. * Promotional pricing: Temporary pricing products below the list price, and sometimes even below cost, to increase short-run sales. * Geographical pricing: Setting prices for customers located in different parts of the country or world. - FOB-origin pricing(free on board ) 구매자가 운반비용 부담 - Uniform-delivered pricing: 단일 운송비 - Zone pricing: 2개 이상 지역의 단위 운송비 설정 - Basing point pricing: 판매자의 지정 거점에서 운송비를 설정, 선적 지점과 무관하게 - Freight-absorbing pricing: 판매자가 운반비를 부담 * Dynamic pricing: adjusting prices continually to meet the characteristics and needs of individual customers and situations The price cut technique which results in increased market share but less loyal customers in market is classified as📌 The demand for a particular product declines if the price is 📌 If the demand for the product changes considerably with the small change in price then the demand is said to be 📌 The price discrimination in which same market offering Is priced at two different levels on the basis of consumer perception is classified as 📌 The pricing strategy used by companies operating in price sensitive market is classified as 📌 If the total cost is $70000 and the level of production is 30000 units then the average cost is 📌 If the fixed cost is $45000, units sold are 60000 and the variable cost is $25 then the unit cost is 📌 The price increase technique in which company stop giving special discounts to its customers is classified as 📌 The total costs divided by production level to calculate 📌 The sum of variable costs and fixed costs is classified as 📌 Considering accumulated production experience, the decrease in average cost is classified as 📌 The desired return is subtracted from 1 and is divided by unit cost to calculate 📌 The type of auction which have many buyers and only one seller and the bidder raise the price of an offer is classified as 📌 The extra payment awarded for sales program and advertising is classified as 📌 The reduction of price awarded to the customers who pays their bills promptly is classified as 📌 In the procedure of setting the price, the first step is to 📌 The ice-cream brand sell their same serving of ice-cream at different depending where you bought it from such as fine-dine restaurant or local store is example of 📌 The price of product is subtracted from variable cost and then divided by fixed cost to calculate 📌 The form of countertrade in which buyers and sellers exchange goods without involving any third party is classified as 📌 The pricing technique according to which sellers charges high prices everyday and offer low prices on temporary basis is classified as 📌 The pricing technique according to which company charges its customers on the basis of prices of competitors is classified as 📌 The type of auctions which considers both situations such as many buyers and one seller or one seller and many buyers is classified as 📌 The method of pricing in which desired return is multiplied to invested capital divided by unit sales and unit cost is added into result is classified as 📌 The pricing objective of company who is plagued with intense competition and overcapacity is 📌 If the desired return on sales is 70% and the markup price is $65 then the unit cost is 📌 If the fixed cost is $80000, variable cost is $10 and the product is sold for $25 then the break-even volume is 📌 The costs of products that fluctuates with the level of production are classified as 📌 Considering the Dutch auctions, the technique in which the auctioneer lower the announced price till bidder accepts price is used in situation of 📌 The pricing discrimination in which different forms of same market offering is priced differently is classified as Is the decline in average cost of production with accumulated production experience?The decline in the average cost of production with accumulated production is called as learning curve.
What is accumulated production?Accumulated production expenditures include the adjusted bases (or portion thereof) of any equipment, facilities, or other similar assets, used in a reasonably proximate manner for the production of a unit of designated property during any measurement period in which the asset is so used.
Which term refers to pricing that starts with an ideal selling price then targets costs that will ensure that the price is met?Target costing starts with an ideal selling price based on customer value considerations and then aims at costs that will ensure that the price is met.
What is value added pricing?Value-added pricing refers to the practice of pricing a product based on the perceived value that products and their features add for a customer. Sellers attempt to determine what customers believe the value of a particular feature of the product is worth and price the product accordingly.
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The drop in the average per-unit production cost that comes with accumulated production experience.
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