Management and Organizational Studies 1021A/B Chapter : MOS Notes - Feb 1.docx

• School: Western University
• Department: Management and Organizational Studies
• Course: Management and Organizational Studies 1021A/B
• Professor: James O' Brien

Document Summary

Final price = list price (incentives + allowances) + extra fees. Value is the ratio of perceived benefits to price, or: value = perceived benefits. Price: this relationship shows that for a given price, as perceived benefits increase, value increases. Value pricing is the practice of increasing a product"s benefits while maintaining or decreasing price. Price has a direct effect on a firm"s profits. This is apparent from a firm"s profit equation: profit = total revenue total cost. There are four common approaches to helping find an approximate price level to use as a reasonable starting point: Demand-oriented approaches emphasize factors underlying expected customer tastes and preferences more than such factors as cost, profit, and competition when selecting a price level. A firm introducing a new product can use skimming pricing, setting the highest initial price that those customers really desiring the product are willing to pay.