05TS+Pricing+Metrics1.pptx - 05T Price Boivin Drake...

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Marketing 317 Boivin / Drake / Kulchitsky Pricing Metrics: Margin and Markup 05T - Price
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Marketing 317 Pricing strategies Value-Based Competition-Based Cost-Based
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Marketing 317 Cost-based pricing Setting price based on the costs of producing, distributing and selling a product plus a fair rate of return Cost-plus (mark-up) pricing Adding a standard markup to the cost of the product Target return (breakeven) pricing Setting price to break even on costs or to make a specified return
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Marketing 317 Cost-based pricing Problems Ignores consumer perception of value Ignore the psychology of price Does not account for competition Why popular Simple and easy to implement Costs are known within an organization Identifies floor price Consumers feel it is fair
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Marketing 317 Economics 101 Fixed costs (FC) Costs that do not vary with the number of units sold Average FC = fixed cost per unity sold
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