18 Questions
What is the difference between goods and services?
Goods are tangible, while services are intangible.
Which element of a product describes the good or service at its most minimal?
Function
What does a product's feature contribute to?
Functionality
Which category of products should companies invest in according to the text?
High Growth, High Share
What should companies do with products categorized as 'Low Share, Low Growth'?
Liquidate, divest, or reposition these products
What does a product's benefit refer to?
Advantage derived from purchasing the product
What is the purpose of odd-even pricing strategy?
To set prices just below the whole dollar amount to influence customer perception.
Which pricing strategy involves combining multiple products and offering them at a price lower than the sum of their individual prices?
Bundle pricing
What does break-even quantity represent?
The minimum number of units a business must sell to recover all costs and begin making a profit.
What is the main factor that buyers associate with when using odd-even pricing strategy?
The first digit of the price.
What does contribution margin represent?
The markup expressed as a percentage of the selling price.
In bundle pricing, what strategy is employed to entice customers to purchase multiple products?
Packaging several products together at a price lower than the sum of their individual prices.
What is the break-even quantity?
The minimum number of units a business must sell
For the Deluxe Gourmet Pizza, how many units must be sold to break even?
20,000
What is the fixed cost for the Mid-price Pizza?
$100,000
Based on break-even analysis, what question should managers ask regarding selling pizzas?
Should we raise prices and sell fewer pizzas?
What does the break-even quantity help businesses determine?
The minimum number of units needed to cover costs
How does the break-even quantity relate to the selling price and variable costs?
It is inversely proportional to the selling price and variable costs
Study Notes
Product Classification
- Products can be classified as goods (tangible) or services (intangible)
- Examples of goods: laptops, jeans, pencils
- Examples of services: healthcare, education
Product Elements
- A product's function: what it's intended to do
- A product's feature: an additional attribute or offering that contributes to improved usefulness or better experience
- A product's benefit: an advantage derived from purchasing the product
- The combination of a product's functions, features, and benefits gives the product its value
Pricing Strategies
- Odd-Even Pricing: setting the price of a product just below the whole dollar amount
- Buyers tend to associate the price with the first digit they see, making the price seem lower
- Examples: $4.99, $399, $999 instead of $5, $400, $1000
Bundle Pricing
- Packaging several products together and offering the combined package at a single price that is less than the sum of parts
- Examples: "combo" or "package" deals, such as a large popcorn and medium drink for $5
Break-Even Analysis
- A tool that helps managers understand the relationship between costs, price, and number of units sold to make a profit
- Break-even quantity: the minimum number of units a business must sell to recover all costs and begin to make a profit
- Formula: fixed costs / (selling price - variable costs) = number of units to break even
Break-Even Analysis Examples
- Deluxe Gourmet Pizza: need to sell 20,000 units to break even
- Mid-price Pizza: need to sell 10,000 units to break even
- Low-price Pizza: need to sell 100,000 units to break even
Managerial Questions
- Using break-even analysis, managers must ask:
- Can we sell this many units?
- Should we raise the price, sell fewer, but make more profit on each?
- Should we cut the price, sell more, but make less profit on each?
Explore the concept of Odd-Even Pricing, a strategy where product prices are set just below whole dollar amounts to influence consumer perception. Learn about Bundle Pricing, which involves packaging multiple products together and offering them at a single price. Understand how these strategies can impact consumer behavior and purchasing decisions.
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