Mkt Final Study guide (ch15-19)

Use only costs directly attributable to a specific

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use only costs directly attributable to a specific output in setting prices to overcome the arbitrary allocation of fixed expenses Breakeven Analysis Advantages: easily understood by managers & may help them decide whether required sales levels for a certain price are realistic goals Disadvantages: Assumes cost can be divided into fixed & variable categories, ignores the problems of arbitrarily making some allocations Assumes per-unit variable costs don’t change at different levels of operation, ignoring possibility of quantity discounts, etc. Doesn’t Consider demand
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Modified Breakeven Analysis Combines traditional breakeven with an evaluation of consumer demand Directly addresses the key question of whether consumers will actually purchase the product at different prices and in what quantities Goal of Yield Management Designed to maximize revenues in situations in which costs are fixed such as airfares, auto rentals, and theater tickets 5 Pricing Objectives in Global & Online Marketing Profitability, Volume, Meeting Competition, Prestige, & Price Stability Price stability is difficult to achieve in online & global markets because Wars, border conflicts, terrorism, economic trends, changing government policies Chapter 19 3 Major Pricing Strategies Skimming, Penetration, & Competitive EDLP - Everyday Low Pricing, variation of penetration pricing often used by discounters 3 Major Types of Discounts - Cash, Trade, & Quantity discounts 4 Alternatives for handling transportation costs in pricing policies FOB, Uniform-Delivered, Zone, & Basing-Point pricing Pricing Policy- general guideline that reflects marketing objectives & influences specific pricing decisions 2 Types of Psychological Pricing Odd Pricing- set prices at odd #s just under round numbers Unit Pricing- prices in terms of a recognized unit of measurement Promotional Pricing - lower than normal price for a set period of time Price-Quality Connection Price serves as an important indicator of a product’s quality; Convincing consumers they are offering high-quality products at the lowest possible price Price Limits- certain boundaries within which consumers’ product-quality perceptions vary directly with price Competitive Bidding - consists of inviting potential suppliers to quote prices on proposed purchases or contracts Benefits of an Auction
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Buyers- opportunities to buy goods and services at very low prices Seller- opportunity to sell to a wider audience (online), perhaps at a higher price than otherwise would be possible, if the item is popular Transfer Price - price for moving goods between profit centers Profit Center- any part of the organization to which revenue and controllable costs can be assigned 3 Traditional Global Pricing Strategy Worldwide, Dual, & Market-Differentiated Pricing Cannibalization - cutting prices in one selling channel, which creates direct competition with a firm’s own products Bundle Pricing- combining a # of goods or services together & offering them at a set price
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