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Pricing understanding and capturing customer value - Other Internal and External Considerations Affecting Price Decisions

6 important questions on Pricing understanding and capturing customer value - Other Internal and External Considerations Affecting Price Decisions

What is target costing?

A price positioning strategy which starts with an ideal selling price based on customer value consideration and then targets the costs that make sure the price is met.

What's the difference between lineair and non-lineair pricing?

Lineair pricing holds when the price goes op, the demand goes down.

Non-lineair pricing holds when the price goes down, the demand goes down as well.

How can we calculate price elasticity?

% change in demand; (Q1 - Q2) / Q1
% change in price; (P1 - P2) / P1

E< 1.0 - price is inelastic
E>1.0 - price is elastic

What does the demand curve show?

The number of units that the market will buy in a given time period at different prices that might be changed.

What is the difference between penetration pricing and price skimming?

Penetration pricing is charging low prices in order to rapidly gain market share.

Price skimming is charging the highest possible price, because the price is inelastic.

Price-demand relationship varies in different types of markets. Explain for pure competition, monopoly and oligopoly?

1. Pure competition: marketing research, product development, pricing, advertisement and sales don't have that much importance.
2. Monopoly: try to differentiate their products by different price segments by branding, advertising, personal branding.
3. Oligopoly: firms are very sensitive to their competitors' strategies.