Assume that in a recently completed competitive site survey, Damario found the physical quality...


Assume that in a recently completed competitive site survey, Damario found the physical quality of the rooms sold and food served at the Barcena to be in the mid-range of its competitors with regard to quality. Now consider the "buyer's view of value" formula. What would be the likely impact on that formula if the resort immediately implemented the suggested pricing strategy?

Retail price

Retail price is regarded a price at which the retailers sell goods. This price could be the maximum price which can be paid on an acquisition of goods. It involves marginal profit of suppliers, retailers, costs of goods and services, expense of storing goods.

Answer and Explanation:

The suggested price strategy is the mark-up approach from the viewpoint of buyers. And this pricing strategy is dependent on many factors such as the number of customers which are targeted for selling this product, nature of market, extent of competition, price sensitivity of the market.

Various firms use mark-up approach for determining its prices. In this approach, the seller adds its mark-up along with the cost of producing the product. Mark-up indicates the level of profit with the consideration of costs. The formula is represented as,

{eq}% MathType!Translator!2!1!AMSTeX.tdl!AMSTeX! % MathType!MTEF!2!1!+- % feaagKart1ev2aqatCvAUfeBSjuyZL2yd9gzLbvyNv2CaerbuLwBLn % hiov2DGi1BTfMBaeXatLxBI9gBaerbd9wDYLwzYbItLDharqqtubsr % 4rNCHbGeaGqiVu0Je9sqqrpepC0xbbL8F4rqqrFfpeea0xe9Lq-Jc9 % vqaqpepm0xbba9pwe9Q8fs0-yqaqpepae9pg0FirpepeKkFr0xfr-x % fr-xb9adbaqaaeGaciGaaiaabeqaamaabaabaaGcbaGaaeOuaiaabw % gacaqG0bGaaeyyaiaabMgacaqGSbGaaGPaVlaabchacaqGYbGaaeyA % aiaabogacaqGLbGaaeypaiaabogacaqGVbGaae4CaiaabshacaqGRa % GaaeyBaiaabggacaqGYbGaae4Aaiaab2cacaqG1bGaaeiCaaaa!4D1C! {\text{Retail}}\,{\text{price = cost + mark - up}}% MathType!End!2!1! {/eq}

For an instance, if the extent of mark-up is recorded as 50%, and the cost of good is $10. Then the mark-up would be $5. Hence, the retail price would be $15.

Similarly, for the service sector, following components are essential to be known:

First component determines the amount which has to be paid to the accountant for recording accounting transactions. Second component includes the provision of training, payments paid on an account of social security, and so on. At last, it involves salaries paid to managers.

Average mark-up figure is based on an establishment of the business. For setting up the mark-value, data relating to trade and commerce is important to be considered. It shows all the possible margins which are created on production of goods and services.

Learn more about this topic:

Merchandising Business: Definition & Examples

from Principles of Marketing: Help and Review

Chapter 1 / Lesson 8

Related to this Question

Explore our homework questions and answers library