Mkt: Chapter 18

markup
a dollar amount added to the cost of products to get the selling price
-stated as a percent
-related to selling price for convenience
markup chain
when a product moves through several levels within a channel between being produced and its final sale at retail to a consumer, the price that the consumer pays is likely the result
stockrate return
number of times the average inventory is sold in a year
With respect to markups and turnovers, a marketing manager should be aware that
the stockturn rate varies according to the industry and the product involved.
average-cost pricing
involves adding a “reasonable” markup to the average cost of a product.
-easy to do
-does not consider how costs change as output changes
-works well if the firm actually sells the quantity it used to calculate the average-cost price.
break-even analysis
useful tool for analyzing costs and evaluating what might happen to profits in different market environments
Trying to find the most profitable price and quantity to produce
requires an estimate of the firm’s demand curve.
The best pricing tool marketers have for looking at costs and revenue (demand) at the same time is
marginal analysis
marginal analysis
focuses on the price that earns the highest profit, but a slight miss does not mean failure because demand estimates do not have to be completely accurate.
Customers tend to be more price-sensitive when
they have substitute ways of meeting a need
prestige pricing
form of demand pricing
– a firm sets a relatively high price for its product as a signal to consumers that it is of high quality or status.
value in use pricing
refers to setting prices that will capture some of what customers will save by substituting the firm’s product for the one currently being used.
price lining
process of setting a few price levels for a product line and then marking all items at these prices.
demand-backward pricing
starts with a price consumers are willing to pay and then figures out what a producer can charge.
complementary product pricing
setting prices on several products as a group
With regard to bid pricing, a marketing manager should be aware that
it is a big problem to estimate all the costs, including the variable and fixed costs that apply to a particular job.