14. Other
factors
leading to
less price
sensitivity
The product is more distinctive.
Buyers are less aware of substitutes or cannot easily compare them
Expenditure is smaller part of buyer’s income
Expenditure is small compared to total cost of end product
Part of the cost is borne by another party
The product is used in conjunction with assets previously bought
The product is assumed to have more quality or prestige
22. Types of costs
• Fixed cost
• Variable Costs
• Total Costs – Sum of Fixed and Variable
• Average Cost – Cost per unit
23.
24. Accumulated Production – The Experience Curve
As workers become more experienced the average cost decreases
25. Target Costing
Marketers research a new product’s desired functions and
the price it will sell.
The firm must examine all its cost elements and bring down
costs in the target range.
27. If the firm’s offer contains features not offered by its nearest
competitor, it should its worth add that to the competitor’s
price.
If the competitor’s offer contains features not offered by the
firm then it should subtract their value from its own price
28. Step 5: Selecting a Pricing Method
Unit cost = Variable Cost +
Fixed Cost
Unit Sales
29. Markup Pricing =
Unit Cost
(1-desired return on sales)
Target
Return =
Pricing
Unit cost +
(Desired return) X (invested capital)
Unit Sales