MKTG Ch. 10


the amount of money charged for a product or a service

________ is the only element in the marketing mix that produces revenue and one of the most flexible marketing mix elements


Customer Value-Based Pricing

uses buyers' perceptions of value as the key to pricing

Good-Value Pricing

Strategy offering the right combination of quality and good service at a fair price

Value-Added Pricing

Rather than cutting prices to match competitors, they attach value added features and services to differentiate their offers and thus support their higher prices

Cost-based pricing

involves setting prices based on the costs of producing, distributing and selling the product plus a fair rate of return for the company's effort and risk

Fixed costs or overhead

Costs that do not vary with production or sales levels
Ex.) bills like rent and salaries

Variable costs

Vary directly with the level of production
Ex.) PC produced by HP involves a cost of computer chips, wires and plastic

Total costs

The sum of the fixed and variable costs for any given level of production

Experience curve (learning curve)

The drop in the average per-unit production cost that comes with accumulated production experience

Cost-plus pricing (markup pricing)

Adding a standard markup to the cost of the product

Break-even pricing

the firm tries to determine the price at which it will break even or make the target return it is seeking

Competition Based Pricing

Involves setting prices based on competitors' strategies, costs, prices and market offerings

Target costing

pricing that starts with an ideal selling price, then targets costs that will ensure that the price is met

Pure competition

the market consists of many buyers and sellers trading in a uniform commodity

Monopolistic competition

the market consists of many buyers and sellers trading over a range of prices rather than a single market

Oligopolistic competition

the market consists of only a few large sellers

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