Pricing, accounting homework help

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timer Asked: Apr 12th, 2017
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Question Description

Pricing

See the discussion. Part 1 & 2 Send e replies both Part 1 The replies should be at least 200 words

Part 2 The replies should be at least 200 words

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Part 1 Question Why does price matter? If you sell 200 hamburgers for $1 each or call them gourmet and charge $10 each and only sell 20, what difference is there? What happens over time? What does pricing say about your business? Who is the customer and what effect does pricing have on them? Answer Price is defined as cost or, from the customer’s perspective, what the customer is willing to give up. What the customer is willing to give up depends on their perception of value. Value is the degree of importance that a customer gives something. As value increases, the customer’s perceived benefits increases (or their perceived costs decreases.) Examples of perceived benefits are: status, convenience, a deal, brand, choice, and quality. These benefits can also overlap. Customers will be more willing to pay higher prices if the perceived benefits are high. For example, if someone lives 30 minutes away from a Walmart Grocery store and only 5 minutes away from a Harris Teeter grocery store, and they perceive convenience and quality to be beneficial and valuable, they would be more willing to pay the higher Harris Teeters prices vs Walmart’s lower prices. On the other hand, lowering costs (depending on the product or service) can cause the perceived benefits (like brand perception and status) to decrease for the customer. For example, if Louis Vuitton lowered their prices to that of Coach, the brand perception would change and the status would decrease. Over time, that could mean the demise of the Louis Vuitton brand. In the example of the hamburgers, price only matters based on the customer’s perceived value of the burger. If the customer prefers quality ingredients, great customer service, and a great customer experience, they might be more willing to pay $10 for a burger vs $1 for a burger with less quality. Part 2 Question Why does price matter? If you sell 200 hamburgers for $1 each or call them gourmet and charge $10 each and only sell 20, what difference is there? What happens over time? What does pricing say about your business? Who is the customer and what effect does pricing have on them? Answer Why does price matter? Most people assume that price is what matters most in a financial transaction. When you are raising money, you want to get the money at the highest price (least dilution). When you are selling, you want to get the highest price for your company. But that is not always the case. Price matters, but my experience says that it often does not matter the most. In many of the venture deals we have done in the past few years, transactions valuation was not the highest price offered to the entrepreneur. And if you are a public company, that effectively means the highest price. Let's say you are one of two or three investors in a closely held startup company, and between the investors and the founders, the group owns 90% of the company, and there are two purchasers. One is willing to pay $250 million in transactions and the Board thinks they will be good owners of the business, will do everything possible to keep the team intact and the service vibrant. The other is willing to pay $300 million in a complex transaction, but has a reputation for blowing up teams, and has been known to mess up the services they acquire. That would be a no brainer. The board should take the lower offer in a heartbeat, assuming they really want to sell the business. If you sell 200 hamburgers for $1 each or call them gourmet and charge $10 each and only sell 20, what difference is there and overtime? The difference is you will sell fewer products and receive less income. Customers will not want to pay $10 for a hamburger that once was $1 i.e., fewer sales. Eventually, overtime, if you continue to sell at those prices, you will be out of business. The demand for your hamburger will reduce and if you continue to purchase a higher quality of beef, the supply for the beef you’re your butcher will change, especially if you’re receiving a discount for purchasing more but now you’re purchasing less. Also, purchasing higher quality of beef will cost you extra. What does pricing say about your business? Pricing shows the value and the worthiness of your business. Pricing shapes your customer’s perception and expertise of what you have to offer. If you don’t value what you’re selling, no one else will. If you price too low, you risk of coming across as cheap instead of valuable. If you price too high, you may not get as many customers. If you price appropriately, you will get a whole other caliber of customers. It’s the difference between Sears and Macy’s. Who are the customer and what effect does pricing have on them? The customer is whoever buys from your business. By setting prices right and keeping customers happy can be hard. But get it right, and you’ll be able to see improved customer satisfaction and increased revenue. To improve overall customer satisfaction, you need to be pricing your products high enough to give you the resources to offer amazing customer experiences. ...
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Tutor Answer

TutorRickss
School: Carnegie Mellon University

part 1.wait for part two in a jiffy..

DISCUSSION PART 1
Price matters a lot in business. Price will determine if a business will make profit and
remain a going concern or it won’t. First of all, price will make customers like you more than
your competitors. When you price ones goods at lower prices and a competitor prices theirs at
higher prices, customers will shun your competitors goods because they will have a perception
that he is charging exorbitantly for something that can actually be obtained at lower prices.
Customers like when they get the value for their money and some feel very bad when they find
out they are being exploited and can completely shun a person because of that. Price...

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Anonymous
Thanks, good work

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