Marketing 1001 Final Review.docx - Marketing 1001 Final Review Chapter 10 Pricing Price The amount of something money time or effortthat a buyer

Marketing 1001 Final Review.docx - Marketing 1001 Final...

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Marketing 1001 Final Review Chapter 10: Pricing Price - The amount of something— money, time, or effort—that a buyer exchanges with a seller to obtain a product. Price Setting Process (6 Steps): 1. Define Pricing Objectives 2. Evaluate Demand 3. Determine Costs 4. Analyze the competitive price environment 5. Choose a price 6. Monitor and Evaluate the effectiveness of the price 3 Pricing Strategies: Profit Maximization – Setting a relatively high price for a product for a period of time after launch. (AKA Price Skimming) Volume Maximization – Setting a low price to encourage purchases. (AKA Penetration pricing) Survival Pricing – Setting a price to ensure cash flow during difficult times. Fixed Costs – Costs that remain constant and do not vary based on the number of units produced or sold. Salaries, rent, insurance & advertising costs. Variable Costs – Costs that vary depending on the number of units produced or sold. Material, sales commissions, utilities & delivery costs. Break-even Analysis – Process of calculating the break-even point, which equals the sales volume needed to achieve a profit of zero. This is important to pricing because it is used to determine how much you need to sell to make product profitable. Reference Pricing – Prices that customers consider fair for a product. Complicated process, marketers make the mistake of setting prices based on what number will sell the most products – all aspects of perceived consumer value should be considered. Marketers can establish reference pricing instead of just doing research (i.e. Apple w/ different gigabytes/price)
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Escalator Clause : A section in a contract that ensures that providers of goods and services do not encounter unreasonable financial hardship as a result of uncontrollable increases in the costs of or decreases in the availability of something required to deliver products to customers.
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