Title CHAPTER 10&11.pdf ✅

1. assesses customer needs and value perceptions 2. sets its target price based on customer perceptions of value ● two types of value-based pricing: 1. good-value pricing ● is offering just the right combination of quality and good service at a fair price. ● An important type of good-value pricing at the retail level is called everyday low pricing (EDLP), which involves charging a constant everyday price with few or no temporary price discounts (BHX) ● High-low pricing involves charging higher prices on an everyday basis but running frequent promotions to lower prices temporarily on selected items. (COOPMART) 2. value-added pricing ● Attaching value-added features and services to differentiate a company’s offers and charging higher prices 2. Cost-Based Pricing ● sets prices based on the costs for producing, distributing, and selling the product plus a fair rate of return for effort and risk. ● Types of Costs 1. Fixed costs (overhead): Costs that do not vary with production or sales level/ Short-run 2. Variable costs: Costs that vary directly with the level of production. 3. Total costs: The sum of the fixed and variable costs for any given level of production. ● Costs at Different Levels of Production ➔ the economies of scale: the quantity of output goes up, and the cost per unit goes up ➔ constant returns to scale ➔ diseconomies of scale ● Costs as a Function of Production Experience:
● Cost-plus pricing (markup pricing ): Adding a standard markup to the cost of the product. ➔ Benefits ➢ Sellers are certain about costs. ➢ Price competition is minimized. ➢ Buyers feel it is fair. ➔ Disadvantages ➢ Ignores demand and competitor prices ● Break-Even Analysis and Target Profit Pricing 1. Break-even pricing (target return pricing/revenue= cost→ profit =0): Setting a price to break even on the costs of making and marketing a product or setting the price to make a target return.
3. Competition-Based Pricing: ● Competition-based pricing involves setting prices based on competitors’ strategies, costs, prices, and market offerings