Podcast
Questions and Answers
What is the primary characteristic of cost-based pricing?
What is the primary characteristic of cost-based pricing?
Which pricing strategy aims to achieve specific profit goals?
Which pricing strategy aims to achieve specific profit goals?
In what scenario is competition-based pricing most commonly used?
In what scenario is competition-based pricing most commonly used?
How does value-based pricing determine the selling price of a product?
How does value-based pricing determine the selling price of a product?
Signup and view all the answers
What is the main purpose of break-even analysis?
What is the main purpose of break-even analysis?
Signup and view all the answers
Which new product pricing strategy involves setting a high price initially and lowering it later?
Which new product pricing strategy involves setting a high price initially and lowering it later?
Signup and view all the answers
What does target profit pricing focus on?
What does target profit pricing focus on?
Signup and view all the answers
In which pricing strategy is buyer’s perception of value most critical?
In which pricing strategy is buyer’s perception of value most critical?
Signup and view all the answers
Study Notes
Marketing Strategies - Pricing
-
Pricing Approaches:
- Cost-Based Pricing
- Break-Even Pricing
- Value-Based Pricing
- Competition-Based Pricing
Cost-Based Pricing
- Simple cost-plus pricing: Add a standard markup to the product cost.
- Hospitality companies often use this approach.
- Example: Food and Beverage (F&B) cost markup is typically 28-32%.
Break-Even Analysis or Target Profit Pricing
- Aims to find the price where a firm breaks even or achieves a target profit.
- Break-even point: Where costs and revenue are equal (no profit or loss).
Break-Even Point Graph
- A graph representing sales and costs versus units sold.
- Shows the break-even point where total costs and sales are equal.
- Identifies the units sold needed to reach the break-even point.
- Shows the profit zone above the break-even point.
- Shows the loss zone below the break-even point.
Questions About Break-Even
- Calculate the number of days to reach the break-even point if 50 units are sold per day.
- Determine the number of days needed to achieve a $10,000 profit if 50 units are sold each day..
- Calculate the number of days required to break even if 50 units are sold daily at a price of $6 per unit.
Value-Based Pricing
- Focuses on the buyer's perception of value.
- Non-price factors build perceived value.
- Trade-off analysis: Assess customer willingness to pay.
- Companies evaluate customer price sensitivity to determine their pricing strategies.
Competition-Based Pricing
- Pricing strategies aligned with competitors' pricing.
- Less focus on costs or demand.
- Used in highly competitive markets.
New Product Pricing Strategies
- Prestige Pricing: Luxurious and elevated products priced high to support their positioning.
- Market-Skimming Pricing: Initially high prices in a price-insensitive market; can be effective short-term. Potential for competitors to enter the market and reduce prices.
- Market-Penetration Pricing: Low initial prices to quickly enter and gain market share in a price-sensitive market; relies on sales volume economics to lower costs.
Studying That Suits You
Use AI to generate personalized quizzes and flashcards to suit your learning preferences.
Related Documents
Description
Test your knowledge on various pricing strategies in marketing, including cost-based pricing, break-even analysis, and value-based pricing. This quiz covers essential concepts and calculations, such as the break-even point and profit zones. Challenge yourself and enhance your understanding of pricing approaches in business.
