Chapter 20 - Pricing and product mix decisions. The main contents of this chapter include all of the following: Major influences on pricing decision, economic profit-maximising models, pricing strategies, strategic pricing of new products, competitive bidding, legal restrictions on pricing, product mix decisions. | Chapter 20 Pricing and product mix decisions 20- Copyright 2009 McGraw-Hill Australia Pty Ltd PowerPoint Slides t/a Management Accounting 5e by Langfield-Smith Prepared by Kim Langfield-Smith Outline Major influences on pricing decision Economic profit-maximising models Pricing strategies Strategic pricing of new products Competitive bidding Legal restrictions on pricing Product mix decisions 20- Copyright 2009 McGraw-Hill Australia Pty Ltd PowerPoint Slides t/a Management Accounting 5e by Langfield-Smith Prepared by Kim Langfield-Smith 20- Copyright 2009 McGraw-Hill Australia Pty Ltd PowerPoint Slides t/a Management Accounting 5e by Langfield-Smith Prepared by Kim Langfield-Smith Major influences on pricing decisions Market positioning Companies position themselves in certain markets and this may influence product prices A firm with a reputation for very high quality and prestigious products may set a high price, consistent with that image An overemphasis on . | Chapter 20 Pricing and product mix decisions 20- Copyright 2009 McGraw-Hill Australia Pty Ltd PowerPoint Slides t/a Management Accounting 5e by Langfield-Smith Prepared by Kim Langfield-Smith Outline Major influences on pricing decision Economic profit-maximising models Pricing strategies Strategic pricing of new products Competitive bidding Legal restrictions on pricing Product mix decisions 20- Copyright 2009 McGraw-Hill Australia Pty Ltd PowerPoint Slides t/a Management Accounting 5e by Langfield-Smith Prepared by Kim Langfield-Smith 20- Copyright 2009 McGraw-Hill Australia Pty Ltd PowerPoint Slides t/a Management Accounting 5e by Langfield-Smith Prepared by Kim Langfield-Smith Major influences on pricing decisions Market positioning Companies position themselves in certain markets and this may influence product prices A firm with a reputation for very high quality and prestigious products may set a high price, consistent with that image An overemphasis on price cutting can damage a product’s image and reduce profitability 20- (cont.) Copyright 2009 McGraw-Hill Australia Pty Ltd PowerPoint Slides t/a Management Accounting 5e by Langfield-Smith Prepared by Kim Langfield-Smith Major influences on pricing decisions (cont.) Product costs In the long term, firms must produce at a cost below selling price The importance of product cost in price setting varies across industry Even when a firm sets a price below cost, it is still important to have an awareness of product cost 20- Copyright 2009 McGraw-Hill Australia Pty Ltd PowerPoint Slides t/a Management Accounting 5e by Langfield-Smith Prepared by Kim Langfield-Smith (cont.) Major influences on pricing decisions (cont.) Customer value Understanding customer value is a critical aspect in price setting The difference between the value that a customer gains by owning and using a product, and the price paid for the product is the net value to the customer Businesses must understand .
