LO 13.1 Identify the three main considerations in setting a price for a product.
The economic factors that have the largest influence on pricingare the prices charged by competitors, the amount of customer demand for your product, and the costs incurred in producing, purchasing, and selling your products.
LO 13.2 Explain what breakeven analysis is and why it is important for pricing in a small business.
Breakeven analysis ensures that your prices are set above total costs, allowing you to make a profit. It is also useful in estima-ing the needed demand for a product at different price levels. Finally, breakeven analysis shows how many units need to be sold to generate a target dollar return.
LO 13.3 Present examples of customer-oriented and internal-oriented pricing.
Customer-oriented price strategies, such as penetration pricing, skimming, and psychological pricing, focus on the wants and needs of your target customers and the number of units of your product they will buy. Internal-oriented pricing involves setting your prices according to the financial needs of yourbusiness, with less regard for customer reaction.
LO 13.4 Explain factors affecting small businesses getting paid.
Small businesses extend credit to their customers to realize sales that would not have been made without credit, and to increase the volume and frequency of sales to existing cus-tomers. Credit is extended through open charge accounts, installment accounts, lines of credit, and acceptance of credit cards.
LO 13.5 Describe the advertising, personal selling, public relations, and sales-promotion tools that a small business owner uses to compile a promotional mix.
A promotional mix is the combination of advertising, per-sonal selling, sales promotions, and public relations that best communicates the message of a small business to its customers.