Ch 13 - Pricing, Promoting, and Distribution Products - Chapter 13 Pricing Promoting and Distributing Products LO-1 Identify the various pricing

Ch 13 - Pricing, Promoting, and Distribution Products -...

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Chapter 13: Pricing, Promoting, and Distributing Products LO-1: Identify the various pricing objectives that govern pricing decisions, and describe the price-setting tools used in making these decisions. pricing: process of determining what the customer pays and the seller receives in exchange for a product > Pricing to Meet Business Objectives: - pricing objectives: the goals that sellers hope to achieve in pricing products for sale 1. Profit-Maximizing Objectives - Revenue = Selling price X units sold - set price to generate highest possible total profits - managers weigh revenue against costs for materials, labour, capital resources, marketing costs 2. Market-Share (Penetration) Objectives - market share (penetration): a company’s percentage of the total industry sales for a specific product type - set objectives based on events e.g. declining share - Toyota cut prices to regain lost market share after millions of cars recalled > Price-Setting Tools: 1. Cost-Oriented Pricing - pricing that considers a firm’s desire to make a profit and its need to cover production costs - Selling price = Seller’s costs + Profit - markup: amount added to an item’s purchase cost to sell it at a profit - Markup percentage =  out of every $1.00 taken in, $0.xx will be gross profit 2. Breakeven Analysis: Cost-Volume-Profit Relationships - firm will cover variable costs: costs that change with quantity produced and sold - firms pay fixed costs: costs incurred regardless of quantity - breakeven analysis: for a particular selling price, assessment of the seller’s costs versus revenues at various sales volumes - breakeven point: sales volume at which total revenues equals total costs (fixed+variable) - Breakeven point = - Profit = Total Revenue (Total F.C. + Total V.C.)
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LO-2: Discuss pricing strategies that can be used for different competitive situations and identify the pricing tactics that can be used for setting prices. > Pricing Strategies 1. Pricing Existing Products: a) pricing above prevailing market prices for similar products (higher price = higher quality) b) pricing below market prices, product of comparable quality to higher-priced competitors c) pricing at or near market prices 2. Pricing New Products: - price skimming: setting an initially high price to cover new product costs + generate profit - penetration pricing: setting an initially low price to establish new product in market 3. Fixed vs. Dynamic Pricing for Online Businesses:
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