S ummary

In the end, the consumer decides whether the company has set the right price. The consumer weighs the price against the perceived values of using the product - it' the price exceeds the sum of die values, consumers will not buy the product. Consumers differ in the values they assign to different product features and marketers often vary their pricing strategies for different price segments. When assessing the market and demand, the company estimates the demand curve, which shows the probable quantity purchased per period at alternative priee levels. The more inelastic the demand, the higher the company can set its price. Demand and consumer -value perceptions set the ceiling for prices.

Consumers compare a product's price to che prices of competitors' products. A company must learn the price and qualities of competitors' offers and use them as a starting point for its own pricing.

The company can select one or a combination of three general pricing approaches: the cost-based approach (cost-plus pricing, break-even analysis and target profit pricing); the value-based approach (value-based pricing); and the compvcition-based approach (going-rate or sealed-bid pricing).

Key Terms

Break-even pricing (target profit pricing) 701 Cost-plus pricing 699 Demand curve

Experience curve (learning curve) Fixed costs 685 Going-rare pricing 704

Mark-up/mark-down 699 Monopolistic competition 690 Net profit 695

Oligopolistic competition 691

Price 681

Price elasticity 694

Pure competition 690

Pure monopoly 691 Scaled-bid pricing 705 Target costing 684 Total costs 688 Value-based pricing 702 Variable costs 685

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