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28 Cards in this Set
- Front
- Back
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price
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money/other considerations exchanged for the ownership/use of a g/s
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Price equation
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Price=List price - (incentives and allowances) + extra fees
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value
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ratio of perceived benefits to price
v=perceived benefits/price |
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value-pricing
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practice of simultaneously increasing product and service benefits while maintianing/decrs price
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profit equation
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Profit=TR-TC
=(UPxQ)-TC price affects: quantity sold, and indirectly affects costs |
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6 steps in price setting
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-ID pricing objectives and constraints
-Est demand and revenue -Det cost,vol, and profit rel -select approp price level -set list/quoted price -make special adjustments to list/quoted price |
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pricing objectives
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specifying the role of price in an org's marketing and strategic plans
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managing for long-run profits
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company gives up immed profit in exchange for achieving a higher market share by developing quality products to penetrate competitive markets
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maximizing current profit
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targets can be set and performance measured quickly
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market share
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ratio of firm's sales rev or unit sales to those of the industry; pursued when industry sales are rel flat/declining
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unit volume
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Q produced/sold as a pricing objective
sell multiple products at difff prices therefore need to match unit vol demanded by customers w/price and production capacity |
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pricing constraints
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limit the range of prices a firm may set
-demand for product class, product, and brand -newness/stage in product life cycle -single vs product line -cost of covering and marketing product -cost of changing prices and time pd they apply -type of competitive mkts: pure monopoly, oligopoly, monopolistic competition, pure competition -competitors' prices |
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demand curve
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influenced by:
consumer tastes, price and avail of similar products, consumer income dec price, move along curve incrs in consumer income, shift curve |
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demand factors
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det consumer's willingness and ability to pay for g/s
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Total revenue
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total money received from the sale of the product
TR=PxQ |
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Avg rev
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avg amt of $ rec for selling one unit of a product (price per unit)
AR=TR/Q=P |
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Marginal rev
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change in total rev that results from producing and marketing one add unit
MR=Change in TR/1u increase in Q=slope of TR curve always falls at twice the rate as the D curve |
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price elasticity of demand
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how sensitive consumer demand and firm's rev are to changes in product price
E = % ∆ Quantity demanded/ %∆P usually neg # |
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elastic demand
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1% dec in P produces >1% increase in Q demanded
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inelastic demand
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1% dec in P produces <1% increase in Q demanded, dec rev
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unitary demand
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%change in price produces less then a 1%change in Q demanded so that sales rev remains the same; Price elasticity = 0
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Total cost
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total expense incurred by a firm in producing and marketing a product
=FC+VC |
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unit variable cost
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vc/q
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marginal cost
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change in total cost that results from proudcing and marketing one add unit of a product
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marginal analysis
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continuing, concise trade-off of incremental costs against incremental revenues. as long as MR>MC, a firm will expand output of that product
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break-even analysis
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relationship btwn TR and TC to det profitability at various levels of output
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Break even point
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quantity at which TR=TC. profit then comes from all units sold beyond the BEP
BEPquantity = FC/P - UVC |
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break even chart
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where TR and TC curves intersect ; BEP is where profit = 0
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