The amount of money charged for a product or service, or the sum of the values that customers exchange for the benefit of having or using the product or service.
Customer value-based pricing
Setting price based on buyers’ perceptions of value rather than on the seller’s cost.
Offering just the right combination of quality and good service at a fair price.
Attaching value-added features and services to differentiate a company’s offers and charging higher prices.
Setting prices based on the costs of producing, distributing, and selling the product plus a fair rate of return for effort and risk.
Fixed costs (overhead)
Costs that do not vary with production or sales level.
Costs that vary directly with the level of production.
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 (target return pricing)
Setting price to break even on the costs of making and marketing a product, or setting price to make a target return.
Setting prices based on competitors’ strategies, prices, costs, and market offerings.
Pricing that starts with an ideal selling price, then targets costs that will ensure that the price is met.
A curce that shows the number of units the market will buy in a given time period, at different prices that might be charged.
A measure of the sensitivity of demand to changes in price.