Chapter 5
Pricing Wisely
IN THIS CHAPTER
Understanding the importance of product differentiation
Addressing absorption costing
Using cost-plus pricing
Taking risks with variable-cost pricing
Aiming for target costing
Awell-set price for any product or service, if it’s set for the right reasons rather than by accident, results from an understanding of human behavior. How much will customers be willing to pay? Will charging more alienate customers or make your product appear to be more valuable? Can you charge enough to pay for the costs of doing business or have your suppliers been increasing their own prices lately? Are you attempting to maximize your revenues or your profits and why? To answer these questions, you must understand both market forces and the cost structure of your business.
In this chapter we'll discuss how to use your knowledge of cost behavior to make savvy pricing decisions, how to model internal costing, and even how to develop outsourcing strategies.
Differentiating ...
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