Cost-plus pricing (markup pricing): Adding a standard markup to the cost of the product.Does using standard markups to set prices make sense? Generally, no. Any pricing method that ignores demand and competitor prices is not likely to lead to the best price.Break-even pricing (target return pricing):Setting price to break even on the costs of making and marketing a product or setting price to make a target return.Competition-based pricing:involves setting prices based on competitors’ strategies, costs, prices, and market offerings. Consumers will base their judgments of a product’s value on the prices that competitors charge for similar products.No matter what price you charge—high, low, or in between—be certain to give customers superior value for that price.Price decisions must be coordinated with product design, distribution, and promotion decisions to forma consistent and effective integrated marketing program.If the company has selected its target market and positioning carefully, then its marketing mix strategy, including price, will be fairly straightforwardA firm can set prices to attract new customers or profitably retain existing onesTarget costing:Pricing that starts with an ideal selling price and then targets costs that will ensure that the price is met.The best strategy is not to charge the lowest price but rather differentiate the marketing offer to make it worth a higher priceUnder pure competition, the market consists of many buyers and sellers trading in a uniform commodity, such as wheat, copper, or financial securities.Under monopolistic competition, the market consists of many buyers and sellers who trade over a range of prices rather than a single market price.Under oligopolistic competition,the market consists of a few sellers who are highly sensitive to each other’s pricing and marketing strategies. Because there are few sellers, each seller is alert and responsive to competitors’ pricing strategies and moves.In a pure monopoly,the market consists of one seller.Consumers with limited budgets probably will buy less of something if its price is too high.Demand curve:A curve that shows the number of units the market will buy in a given time period at different prices that might be charged.If demand hardly changes with a small change in price, we say the demand is inelastic. If demand changes greatly, we say the demand is elastic.Price elasticity:A measure of the sensitivity of demand to changes in price.Buyers are less price sensitive when the product they are buying is unique or when it is high in quality, prestige, or exclusiveness; when substitute products are hard to find or when they cannot easily
compare the quality of substitutes; and when the total expenditure for a product is low relative to theirincome or when the cost is shared by another party.