Cost-plus pricing takes the cost of producing your product or service and adds an amount that you need to make a profit. This is usually expressed as a percentage of the cost. It is generally more suited to businesses that deal…
What type of strategy consists of geographical pricing, price discounts and allowances, promotional pricing, and differentiated pricing…
Market-penetration pricing: Setting a low price for a new product to attract a large number of buyers and a large market share.…
As mentioned in the introduction, the role of pricing within the marketing mix is a varied one depending on what the firm is trying to achieve and the conditions within which it is operating. This contradicts what economic theory tells us: that pricing should be based upon setting prices at the point where Marginal Revenue = Marginal Cost in order to maximise firm profits. However, in real life “few firms explicitly follow the economic model in developing pricing policy” (Doyle 1997), because firms may be trying to achieve other things than maximising profits such as gaining market share, in which case they could be using the loss-leader tactic (where prices are set at a point which actually makes a loss for the firm which they are able to recoup through customer retention once prices increase or through the sale of full price complementary products). Doyle suggests that there are several common type of pricing policies such as: market-penetration pricing, market-skimming pricing, cost-orientated pricing, perceived-value pricing and price discrimination.…
Firms today are in their perspective industries to maximize consumer satisfaction, increase revenue, and shareholders profits. These tasks require attention to detail when pricing their products. There are always competitors lurking and waiting by the wayside to gain market share and a competitive advantage.…
Cost-plus pricing -- Used mainly by manufacturers, cost-plus pricing assures that all costs, both fixed and variable, are covered and the desired profit percentage is attained.…
Pricing strategy is one encompasses three different dimensions in order to improve firm’s profitability and returns on investment including firstly the cutting down the cost and increase their margins, sell more products (may be by reducing sales prices for products having higher…
Pricing is the actual fee you intend to charge for the product or service to your target consumer group for profit. When setting prices,always remember that profits are always affected by any discounts and or allowances you may coose to offer in the future,and be sure that you are setting profits within the legal limits of the law. Many great business plans have failed simply because no one took the time to consider the legal side of planning.…
If you are offering a new product there are two approaches you could adopt: . Price Skimming - opts for a high price initially to take advantage of demand for a new product . Penetration Pricing - attempts to gain a large share of the market for your product before the competition appears on the scene, by setting a fairly low price to dominate the market…
The Cost- based pricing concept is regulating the cost of production or fulfillment as the basis for pricing goods and or services. Using this method, the selling price of a product will be the cost to produce it, including both direct and indirect costs, plus an additional amount to generate a profit for the seller. The strategy to establishing this type of pricing has a financial objective of setting a high price to make high profits initially. Then following a recovery period of extensive research and development cost to maximize profits before any factors, such as competitors begin to enter the market. Forming a low price on products to make quick sales is a way business (large or small) strategize to increase cash flow. The formula used to map out this type of pricing is : Break-Even Unit Volume= (Fixed costs/ Unit Contribution Margin). Unit Contribution Margin= Selling Price per unit-Variable cost per unit. The only disadvantage with cost based pricing is that if the cost increase, the price of the product must increase as well. Cost based pricing is sub-classified into four other types of pricing 1.) Cost plus pricing- a fixed percentage of profit is added to the cost. The fixed percentage of profits could be the manufacturer 's profit, wholesalers profit and retailer 's profit. 2.) Full Cost Pricing- Total cost is computed by adding the variable and fixed cost in the product manufacturing, administration and selling. On the total cost, the required margin of…
Pricing is one of the most important elements of the marketing mix, as it is the only mix, which generates a turnover for the organisation. The remaining 3p’s are the variable cost for the organisation. It costs to produce and design a product; it costs to distribute a product and costs to promote it. Price must support these elements of the mix. Pricing is difficult and must reflect supply and demand relationship. Pricing a product too high or too low could mean a loss of sales for the…
1. What was Apple’s primary pricing objective when it introduced the iPhone? What was its primary objective in cutting the product’s price just two months after introduction?…
Pricing is depend on the unit costs, consumer capability and the breakeven analysis, To perform the breakeven analysis and to calculate the unit cost ,we should consider about the two relevant costs. Those are fixed costs and variable costs.…
Product pricing must support the other three elements, product, place, and promotion. Product pricing should consider fixed and variable costs, competition, organizational objectives, positioning strategies, and the consumer’s willingness to pay. Organizations oftentimes adopt different pricing strategies, Carmex has adopted four different pricing approaches (“Marketing Mix (4P’s) Price And Pricing Strategies,” n.d.). Carmex managers analyze information from four different pricing approaches in order to determine the optimal price to market their product. These pricing approaches are known as are demand-orientated, cost-orientated, profit orientated, and competition…
The pricing strategy for a new product should be developed so that the desired impact on the market is achieved while the emergence of competition is discouraged. Two basic strategies that may be used in pricing a new product are skimming pricing and penetration pricing.…