2204chapter%209%20review

2204chapter%209%20review - CHAPTER 9 REVIEW Pricing...

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CHAPTER 9 REVIEW Pricing decisions are important because : It creates profits, Influences customers to purchase or not Can be a competitive weapon useful in gaining market share Variable costs The costs of production that are tied to and vary depending on the number of units produced; Typically include raw materials, processed materials, component parts, and labor Fixed costs The costs of production that do not change with the number of units produced. Average variable costs The total spent on raw materials, labor, and so on divided by the number of items produced Average fixed costs Fixed costs remain the same no matter the level of production) will decrease as the number of units produced increases. To calculate divide fixed costs by the number produced. Average total costs The total cost (the total of the fixed costs and the variable costs for a set number of units produced) divided by the number of units produced. Break-even analysis A method for determining the number of units that will have to be produced and sold at a given price to break-even—that is, to neither make a profit nor suffer a loss. Marketers use break-even analysis to help them in establishing and deciding on the price for a product. Pricing Objectives
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Sales or market share pricing objective Involves setting prices at a level that will maximize sales or will attain a desired level of sales or market share. Strategies to achieve this objective include: - Value pricing, - Frequent discounting, - Umbrella pricing and - Price bundling. A profit pricing objective Prices products with a focus on a target level of profit growth or a desired net profit margin. Strategies to achieve this objective include: - Cost-based pricing strategies - Demand-based pricing strategies - Experience-based pricing strategies. A competitive effect
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2204chapter%209%20review - CHAPTER 9 REVIEW Pricing...

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