Chapter 12 - Chapter 12 Pricing Price money exchanged for...

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Chapter 12 – Pricing Price – money exchanged for the ownership or use of a good or service Barter – exchanging goods and services for other goods and services Price equation: Final price = List Price – Incentives and allowances + Extra Fees “The higher the price, the higher the quality” Value pricing – the practice of increasing product and service benefits while maintaining or decreasing the price Profit equation: Profit = Total Revenue – Total Cost Common approaches to price levels: (1) Demand-Oriented (2) Cost-Oriented (3) Profit- Oriented (4) Competition-Oriented Demand-Oriented Approaches – approach emphasizes customer tastes and preferences o Skimming Pricing – setting the highest initial price that customers really desiring the product are willing to pay. Once these customers’ demand is met the price is lowered for the next layer of customers. o Penetration pricing - setting a low initial price to appeal to the mass markets o Prestige pricing – setting high price so that quality or status is associated with the product and will attract customers o Odd-Even Pricing – setting prices a few cents under an even number to give the image as below a certain price o Target pricing – when manufacturers estimate the price the ultimate consumer will spend and bases their price off estimated profit of wholesalers and retailers o Bundle pricing – the marketing of two or more products in a single package price. Customers value the package more than the content.
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Chapter 12 - Chapter 12 Pricing Price money exchanged for...

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