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Chapter 13: Pricing Concepts - Coggle Diagram
Chapter 13: Pricing Concepts
Foundations of Pricing Strategies
Price
The amount of funds required to purchase a product
Factors Pricing Decisions
Potential demand
Competition
Costs
Calculating Markup and Margin
Markup
The cost multiplied by one plus the target markup percentage
Margin
The portion of sales revenue left over after paying product costs
Cost-based pricing
Using the product cost plus a target markup
percentage to calculate the sales price
Pricing Objectives
Competition objectives
Pricing practices intended to maintain pricing
parity or emphasize overall product value to avoid direct price comparison
Prestige pricing
Establishing a relatively high price to develop and
maintain an image of quality and exclusiveness
Volume or sales objectives
Pricing practices aimed at achieving a
particular sales volume or market share
Fixed and Variable Costs
Variable costs
Costs that change with the level of production
Fixed costs
Costs that remain stable at any production level within a
certain range
Breakeven Analysis
The method for determining the amount of product that must be sold at a given price to generate sufficient revenue to cover total costs both fixed and variable
An effective tool for marketers in assessing the sales
required for covering costs and achieving certain profit levels.
Unit : Breakeven point (in units) = Total Fixed Costs/Gross Margin (or Contribution
Margin)
The Cost-Volume-Profit Relationship
Cost-volume-profit (CVP)
The relationship between prices, demand, and overall profitability