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Unformatted text preview: NATURE AND IMPORTANCE OF PRICE What is a price? Price is the money exchanged for the ownership or use of a product Practice of exchanging goods for services w.o money is called bartering Price as an Indicator of Value Value pricing is the practice of increasing product benefits while maintaining or decreasing the price (giving more bang for the buck) o Ex. supersizing at fast food restaurants GENERAL PRICING APPROACHES Four ways to find a reasonable starting price point Demand-oriented o Emphasize factors underlying expected customer preferences Skimming Pricing: when introducing an new product set the highest initial price so that the consumers who really want the product will pay for it at this price, as the products are sold the price slowly decreases to cater to all people Penetration Pricing: Set a low initial price to appeal to the mass market Prestige Pricing: Setting a high price to increase perceived quality Odd-Even Pricing: Making prices .99 as opposed to 1 dollar Target Pricing: A pricing method that involves (1) identifying the price at which a product will be competitive in the marketplace, (2) defining the desired profit to be made on the product, and (3) computing the target cost for the product by subtracting the desired profit from the competitive market price. The formula is Target Price Desired Profit= Target Cost Bundle Pricing: Marketing two or more products together for a single price Yield Management Pricing: Charging different prices to maximize...
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This test prep was uploaded on 12/03/2007 for the course AEM 2400 taught by Professor Mclaughlin,e. during the Fall '07 term at Cornell University (Engineering School).
- Fall '07