Pricing Strategy Prelims:
Complete Exam Study
Guide and Review
|Guaranteed success|
, Price The amount of money charged for a product or service; the only marketing mix
element that generates revenue.
Value The worth a customer assigns to a product based on expected benefits,
centering on utility, quality, and emotional satisfaction.
Cost The total financial outlay and resource investment required to produce,
manufacture, distribute, and market a product or service.
Fixed Costs Expenses that do not change regardless of how many units are produced or
sold (e.g., rent, insurance, administrative salaries).
Variable Costs Expenses that fluctuate directly in proportion to the volume of production or
output (e.g., raw materials, packaging).
Direct Costs Outlays that can be specifically and completely traced to the creation of a
particular product or service.
Indirect Costs (Overhead) General operational expenses necessary to run the business that cannot be
easily assigned to a single unit of product.
Total Cost The comprehensive sum of all combined fixed, variable, direct, and indirect
costs incurred by the enterprise.
Unit Cost The cost associated with producing one unit of a product, calculated as Total
Cost divided by Number of Units Produced.
Contribution Margin The amount remaining from sales revenue after total variable costs are
deducted.
Cost-Plus Pricing Setting prices by calculating total costs per unit and adding a pre-determined
percentage markup.
Value-Based Pricing Setting prices based primarily on a buyer's perception of value rather than on
the seller's cost.
Complete Exam Study
Guide and Review
|Guaranteed success|
, Price The amount of money charged for a product or service; the only marketing mix
element that generates revenue.
Value The worth a customer assigns to a product based on expected benefits,
centering on utility, quality, and emotional satisfaction.
Cost The total financial outlay and resource investment required to produce,
manufacture, distribute, and market a product or service.
Fixed Costs Expenses that do not change regardless of how many units are produced or
sold (e.g., rent, insurance, administrative salaries).
Variable Costs Expenses that fluctuate directly in proportion to the volume of production or
output (e.g., raw materials, packaging).
Direct Costs Outlays that can be specifically and completely traced to the creation of a
particular product or service.
Indirect Costs (Overhead) General operational expenses necessary to run the business that cannot be
easily assigned to a single unit of product.
Total Cost The comprehensive sum of all combined fixed, variable, direct, and indirect
costs incurred by the enterprise.
Unit Cost The cost associated with producing one unit of a product, calculated as Total
Cost divided by Number of Units Produced.
Contribution Margin The amount remaining from sales revenue after total variable costs are
deducted.
Cost-Plus Pricing Setting prices by calculating total costs per unit and adding a pre-determined
percentage markup.
Value-Based Pricing Setting prices based primarily on a buyer's perception of value rather than on
the seller's cost.
