What is the lowest level of production and sales at which a company can break even on a particular product?

Cost-volume-profit (CVP) formula:

px = vx + FC + Profit

p is the price per unit,
x is the number of units,
v is variable cost per unit and
FC is total fixed cost.

Describe three major types of pricing associated with business products.

Describe three major types of pricing associated with business products.

Setting prices for business products is different from setting prices for consumer products because of several factors, including the size of purchases, transportation considerations, and geographic issues.

The three types of pricing associated with business products are geographic pricing, transfer pricing, and discounting.

Explain the different strategies available to companies for setting prices.

Explain the different strategies available to companies for setting prices.

Pricing strategies fall into five categories: new-product pricing, differential pricing, psychological pricing, product-line pricing, and promotional pricing.

Price skimming and penetration pricing are two strategies used for pricing new products.

Differential pricing can be accomplished through negotiated pricing, secondary-market pricing, periodic discounting, and random discounting.

Types of psychological pricing strategies are odd-number pricing, multiple-unit pricing, reference pricing, bundle pricing, everyday low prices, and customary pricing.

Product-line pricing can be achieved through captive pricing, premium pricing, and price lining.

The major types of promotional pricing are price-leader pricing, special-event pricing, and comparison discounting.

Examine the three major pricing methods that firms employ.

Examine the three major pricing methods that firms employ.

The three major pricing methods are cost-based pricing, demand-based pricing, and competition-based pricing.

When cost-based pricing is employed, a proportion of the cost is added to the total cost to determine the selling price.

When demand-based pricing is used, the price will be higher when demand is higher, and the price will be lower when demand is lower.

A firm that uses competition-based pricing may choose to price below competitors' prices, at the same level as competitors' prices, or slightly above competitors' prices.

Identify the major pricing objectives used by businesses.

Identify the major pricing objectives used by businesses.

Objectives of pricing include survival, profit maximization, target return on investment, achieving market goals, and maintaining the status quo.

Firms sometimes have to price products to survive, which usually requires cutting prices to attract customers.

The return on investment (ROI) is the amount earned as a result of the investment in developing and marketing the product. Some firms set an annual percentage ROI as the pricing goal. Other firms use pricing to maintain or increase their market share.

In industries in which price stability is important, firms often price their products by charging about the same as competitors.

Describe the economic basis of pricing and the means by which sellers can control prices and buyers' perceptions of prices.

Describe the economic basis of pricing and the means by which sellers can control prices and buyers' perceptions of prices.

A product is a set of attributes and benefits that has been designed to satisfy its market while earning a profit for its seller.

Each product has at price at which it balances consumers desires and expectations with a firm's need to make a profit.

The price of a product is the amount of money a seller is willing to accept in exchange for the product at a given time and under given circumstances.

Price thus serves the function of allocator. It allocates goods and services among those who are willing and able to buy them. It allocates financial resources among producers according to how well they satisfy customers' needs.

Price also helps customers to allocate their own financial resources among products.

Price competition occurs when a seller emphasizes a product's low price and sets a price that equals or beats competitors' prices. To use this approach most effectively, a seller must have the flexibility to change prices often.

Price competition allows a marketer to set prices based on demand. The Internet has made it more difficult than ever for sellers to compete on price.

Non-price competition is based on factors other than price. It is used most effectively when a seller can make its product stand out from the competition by differentiating product quality, customer service, promotion, packaging, or other features.

Buyers must be able to perceive these distinguishing characteristics and consider them desirable.

Buyers' perceptions of prices are affected by the importance of the product to them, the range of prices they consider acceptable, their perceptions of competing products, and their association of quality with price.