Unit 10: Pricing Strategies

The price of a product must be higher than the variable cost per unit to ensure profitability.

The price of a product is set based on the cost of producing it, including fixed and variable costs.

Total revenue generated from sales should exceed total production costs to ensure a profit.

The selling price per unit doesn't necessarily need to cover all production costs, as long as the overall profit margin is positive.

Costs are influenced by the price of a product rather than the other way around.

Fixed costs don't change with the quantity of goods produced.

Variable costs change with the amount of goods produced.

The cost of producing one unit of a product.

A pricing model where customers pay for each unit consumed or each additional user.

A pricing model where customers pay only for the amount of service they use, not a fixed rate.

The advantage of unit-based pricing where the cost scales proportionally to the usage or number of users.

A disadvantage of unit-based pricing where customers may be hesitant to expand their use or become loyal due to additional per-unit costs.

A disadvantage of usage-based pricing where revenues can be unpredictable due to varying levels of consumption.

A pricing model that combines elements of both freemium and premium models. Offers a free basic service with ads, but allows users to pay to remove ads and access additional features.

A pricing model where users pay a fixed amount regardless of how much they use the service. This fee covers full access for a set period, like monthly or yearly.

A pricing strategy that offers various price levels based on usage or volume. Users pay more for increased service or resource consumption.

A pricing strategy where the cost is determined by the number of units or users. Each additional unit or user incurs a cost.

A promotional strategy that grants users full access to premium content for a limited period to entice them into subscribing after the trial ends.

A pricing model where users pay a subscription fee to access content or services. This could be monthly, yearly, or another recurring timeframe.

The customer's subjective assessment of a product's worth, based on their needs, wants, and understanding of its value.

Pricing strategy where a high initial price is set for a new product to maximize profit, then lowered over time.

Pricing strategy where a low initial price is set for a new product to attract a large customer base and gain market share.

Pricing strategy where a product's price is set to match or slightly undercut the prices of competitors.

A pricing model where users pay a recurring fee for ongoing access to a product or service.

A subscription model where users get limited free access and can pay for additional features or exclusive content.

A subscription model where users pay for full access to all features.

A pricing method that considers the perceived value of a product to customers when setting prices.

The response of customers to the price of a product. It describes how much the price changes when the quantity demanded changes.

Understanding the significance of price to customers, considering factors like the perceived value of the product, availability of alternatives, and overall cost-benefit analysis.

Various factors that influence a customer's responsiveness to price changes. These factors include perceived value, availability of substitutes, cost-sharing, and the product's perceived significance.

When different groups of customers are charged different prices for the same product. This is based on the customer's willingness to pay.

When a product is unique and has no close substitutes, customers are less sensitive to price changes. They are willing to pay a premium due to the product's exclusivity.

Customers are less sensitive to price when they are unaware of comparable alternatives or if it's difficult to assess the quality of substitutes. This makes it more difficult for customers to compare prices and make informed decisions.

When the cost of a product is a small portion of a buyer's overall income or the total cost of the final product, customers are less sensitive to price changes. They are less likely to drastically alter their purchase behavior due to price fluctuations.

When the cost of a product is shared between parties, price sensitivity decreases. This is because each individual bears a smaller portion of the cost, reducing their motivation to find cheaper alternatives.