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Human being eat me......

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Cost-based pricing is the simplest pricing method used by companies. It is primarily used because it is easy to calculate, requires little information, and allows them to maximize their profits. They increase production until MR equals to MC. It is useful when information on demand and costs is not easily available.

Value-based pricing. Perception is everything.

The setting of the price is based on the benefits provides to customers.

Reference : Boundless. “Cost-Based Pricing.” Boundless Business. Boundless, 01 Jun. 2015. Retrieved 02 Jun. 2015 from https://www.boundless.com/business/textbooks/boundless-business-textbook/product-and-pricing-strategies-15/pricing-methods-93/cost-based-pricing-434-429/

P= Price; C=Cost; MC=Marginal Cost; ATC= Average Total Cost; D= Demand; AR=Average Revenue; MR=Marginal Revenue; Q=Quantity

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Cost-Based Pricing

Cost-based pricing uses manufacturing or production costs as its basis for pricing. The cost-based pricing company uses its costs to find a price floor and a price ceiling. The floor and the ceiling are the minimum and maximum prices for a specific product or service; they serve as a price range. If the market conditions are such that the going competitive price is under the price floor, the company may price at the floor or attempt to lower its costs to lower the floor. But ideally, the company should price somewhere in between the floor and the ceiling, according to the McDonough School of Business. Many companies that produce in masses use this pricing strategy, such as companies that produce textiles, food products and building materials.

Value-Based Pricing

A value-based pricing company considers the value of its product or service, as opposed to the cost the company incurred to create and produce it. To do this, the company determines how much money or value its product or service will generate for the customer. This value could originate from factors such as increased efficiency, happiness or stability. Companies or individuals that produce medications, chemicals and computer programs and software and artwork often use this pricing strategy.
Competition based on price
Competitor based pricing is a lot like a bad case of plagiarism in a college class. You’ve partied a little too hard the night before, forgot about the paper you were supposed to write, and then think it’s a good idea to paraphrase the wikipedia article you found on Botswana economics. Obviously the market doesn’t dole out suspensions for copying prices, but the processes of swiping an essay and competitor based pricing are pretty similar.

Also called strategic pricing, this method involves looking at the prices set by other businesses in the same sector, and then adopting those numbers, plus or minus a few percent according to how your product looks that day. The dartboard gets smaller, because there’s more data here, allowing you to rely on your competitors to do the work for you (as long as you trust they actually know what’s going on in the market).
http://image.slidesharecdn.com/chapter06settingpricesandimplementingrevenuemanagement-131118113835-phpapp02/95/chapter-06-setting-prices-and-implementing-revenue-management-9-638.jpg?cb=1384774771

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Question 4: Product Mix Pricing Strategies

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Question 4: Product Mix Pricing Strategies

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- Product line pricing (setting price for the entire product line)

- Optional-product pricing (set the price of optional products or accessories along with the main product)

- Captive-product pricing (setting price for a product that must be used along with a main product)

- By-product pricing (setting the price for by by-products in order to make the main product's price more attractive)

- Product bundle pricing (company offers the bundle at a reduced price to increase sales and get rid of unused products - attract price conscious consumers)

http://www.studylecturenotes.com/mba-marketing/product-mix-pricing-strategies-in-marketing

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Price Adjustment Strategies

1) Discount and Allowance Pricing, eg. when companies take product from suppliers, supplier will give discount when they purchase in bulk or pay in cash.

2) Segmented pricing, eg. museum charge lower admission fee for senior citizen and students

3) Psychological pricing, eg. $9.99 is cheaper than $10.00

4) Promotional pricing, eg. concerts charge less for early bird price.

5) Geographic pricing, eg. Ipad charge cheaper in Malaysia compared to US.

6) Dynamic pricing, eg. AirAsia charge differently, which depend on the demand and supply of the available seat.

7) International pricing, eg. dog meat sold in China is more expensive compared to Malaysia (This is because there is higher demand in China)

*Disclaimer: This is based solely on our opinion and it may not be true.

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Internal factors are what the organization can control. For example, their marketing strategies and objectives.

External factors are what the organization cannot control. For example, competitors strategy, suppliers pricing strategies and customers' behaviour.

In our opinion, those factors are equally important as internal factor reflects the image of the organization while external factor is out of the company's control.

Reference: http://www.knowthis.com/pricing-decisions/factors-affecting-pricing-decision