lesson 2

• With physical products, two types of cost are calculated.

  • Unit Variable Cost
  • Fixed cost
• Unit Variable Cost - Refers to how much it would cost to manufacture one unit of the product.
• Fixed Costs - Unit share of operating and other expenses
• Direct Materials - Used in the manufacture of shirt may include the fabric, thread and buttons.
• Direct Labor - This would include the wages of all workers directly responsible for making the shirt.
• Direct Overhead - Is the amount that was spent in the manufacturing overhead for every shirt produced.
• What are the pricing strategies

  • Mark-up pricing
  • Target return pricing
  • Odd pricing or psychological pricing
  • Loss leader pricing
  • Price Lining
  • Prestige pricing
  • Marginal pricing
  • Predatory pricing
  • Going rate pricing
  • Promotional pricing
• What are the two pricing strategies?

  • Price skimming
  • Penetration pricing
• Mark-up pricing - A pricing strategy that allows the seller a fixed mark-up every time the product is sold
• Target return pricing - A pricing method that allows a product manufacturer to recover a certain portion of his/her investment every year
• Odd pricing or Psychological pricing - A pricing method premised to the theory that consumers will perceive products with odd price endings as lower in price than they actually are.
• Loss leader pricing - Frequently utilized by supermarkets.
• Price lining - Design to simplify a consumer's buying decision.
• Prestige Pricing - Disregard the unit cost of a product or service.
• Marginal pricing - Where a business organization prices it's product at a range below ts unit cost
• Marginal pricing - Where a business organization prices its product at a range below its unit cost but higher than its unit variable cost.
• Predatory pricing - A pricing strategy where the film prices its product lower than the unit variable cost. initially resulting in a short-term losses
• Going rate pricing - A pricing strategy where a company prices its product at the same level as or very close to its competitors' price.
• Promotional pricing - A pricing strategy involving a temporary reduction in the selling price of a product/service in order to induce trial or to encourage repeat purchase.
• Price Skimming - Where the product selling price is way above it's unit cost
• Penetration pricing - A pricing strategy where the new product is priced only marginally above it's unit cost.