The value customer exchange to obtain a product/service. The only revenue-generating element of the marketing mix.
Price
The overall plan a company uses to set the price for its product and services. Beyond simply marking up cost.
Pricing strategy
(3) Why price matters:
First impression
Profit engine
Strategic weapon
Price is the first factor customer notice.
First impression
Price directly impacts revenue. Even a 1% price increase can boost profits by 11%.
Profit engine
Price can undercut competitors/competition or dominate a niche.
Strategic weapon
(4) Factors that affect price:
Cost factors
Market and customer factors
Internal and strategic factors
External economic and regulatory factors
(3) Cost factors:
Fixed costs
Variable costs
Break-even analysis
(3) Market and customer factors:
Demand elasticity
Customer perception and psychology
Competitive environment
Expenses that do not change with production volume.
Fixed costs
Expenses that change with the level of production.
Variable costs
Encompasses both variable and fixed costs. It takes into account all the costs incurred in the production process.
Total costs
Refers to the total costs of production divided by the number of units produced.
Average costs
(4) Computing for the costs of production:
Fixed costs
Variable costs
Total costs
Average costs
(3) Understanding the costs in the product costs:
Direct material
Direct labor
Manufacturing overhead
Are the costs of raw materials or parts that go directly into producing products.
Ex. Plastic used to make toys
Direct material
Are the wages, benefits, insurance that are paid to employees who are directly involved in manufacturing and producing the goods.
Ex. Workers, those who use the machinery
Direct labor
Include direct factory-related costs that are incurred when producing a product or the cost of factory utilities.
Ex. Cost of machinery, cost to operate the machinery
Manufacturing overhead
(2) Manufacturing overhead also include some indirect costs:
Indirect materials
Indirect labor
Materials that are used in the production process but not directly traceable to the product.
Indirect materials
Labor of those who are not directly involved in the production of the product.
Ex. Security guards, supervisor
Indirect labor
In economics business, and cost accpunting refers to the points in which total cost and total revenue are equal.
Break even analysis
A goal set for a salesperson or sales department measured in revenue or units sold fpr a specific time.
Sales target
Refers to the value that a player adds to the costs price of a product.
Mark up
