Complementary goods are products that are often consumed together, where the demand for one increases when the price of the other decreases, and vice versa.
Cost estimation is the process of predicting the cost of a project, product, or service by assessing the unit costs of direct costs and overheads for the purposes of planning, control, and pricing.
A method of pricing a product in which the same product is supplied to different customers, or different market segments, at different prices. This approach is based on the principle that to achieve maximum market penetration, the price charged should be what a particular market will bear.
Full cost pricing is a method of setting the selling prices of a product or service that ensures the price is based on all the costs likely to be incurred in its supply.
Marginal Cost Pricing sets product prices based solely on the product's marginal costs. It is typically employed in exceptional situations where competition is intense.
A markdown refers to a reduction in the original retail selling price of merchandise. It applies only when the price is dropped below the original selling price established by adding a markup percentage to the cost of the merchandise.
Market-based transfer prices align internal transactional prices with prevailing market prices to mitigate bias and ensure fairness within an organization’s various divisions.
Odd-value pricing involves setting retail prices just below even dollar amounts, such as $5.99, $0.39, and $98.99, aiming to create a psychological impression of a better deal.
Penetration pricing involves establishing low pricing for a product to achieve rapid market entry and discourage competitors, with the potential to raise prices later once market share is established.
Price discrimination is the practice of charging different customers different prices for the same products or services. When this practice is used to reduce competition, it may violate antitrust laws.
Understanding the different methodologies for setting selling prices for products and services supplied by an organization.
A retail pricing strategy to attract customers either with a high price image, strong personal service, and merchandise quality or by underbidding the competition in the case of below-the-market pricing.
Take-or-pay is an arrangement where a customer commits to purchasing a certain quantity of a product over a specified period, often at a predetermined price. If the customer fails to meet the agreed-upon purchase quantity, they must still pay the seller. This contract structure protects the buyer against price increases and secures the seller against price decreases.
A trade discount is a reduction in the list price of goods offered by sellers to buyers, often to encourage bulk purchases or maintain customer loyalty.
The Variable Cost Ratio measures the ratio of variable costs to sales revenue, expressed as a percentage. It provides insight into the relationship between production costs and sales, crucial for cost management and pricing strategies.
