ch12 - Ch 12: Pricing Products & Services Final price =...

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Final price = list price – (incentives + allowances) – Extra fees Value ratio of percieved benefits to price Involves judgement by a consumer of the worth and desirability of a product/ service relative to substitutes that satisfy the same need Profit = total revenue – total cost Profit = (unit price X #sold) – (fixed cost + variable cost) Demand-oriented pricing approaches – weigh factors underlying expected customer tastes and preferences more heavily than factors of cost, profit, or competition when selecting a price level skimming pricing – set highest initial price that customers desiring the product are willing to pay. Effective when a) enough prospective customers are willing to buy product immediately at a high price to make profitable sales b) high price will not attract competitors c) lowering price has minor effect on increased sales volume and decreased unit costs d) customers interpret high prices as high quality Ex: Gillette penetration pricing – setting a low initial price on a new product to appeal to the mass market. a) many segments in the market are price sensitive b) low initial price discourages competitors from entering market c) unit production and market costs fall as production volume increases Ex: Nintendo Wii prestige pricing – setting a high price so quality (or status) conscious consumers will be attracted to and buy the product Ex: Rolls Royce, Chanel perfume, Cartier jewelry odd-even pricing – setting prices dollars or cents under an even # Ex: $500 vs $499.99 target pricing – manufacturer deliberately adjusts the composition and features of the product to achieve target price for consumers Ex: Canon bundle pricing marketing of 2+ products in a single package price. Based on the idea
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ch12 - Ch 12: Pricing Products & Services Final price =...

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