Describe cost-oriented pricing strategies. The other major determinant of price is cost. Marketers use several cost-oriented pricing strategies. To cover their own expenses and obtain a profit, wholesalers and retailers commonly use markup pricing: They tack an extra amount onto the manufacturer's original price to cover their costs and earn a profit. Another pricing technique is to maximize profits by setting price where marginal revenue equals marginal cost. Still another pricing strategy determines how much a firm must sell to break even and uses this amount as a reference point for adjusting price.
1 Your firm has based its pricing strictly on cost in the past. As the newly hired marketing manager, you believe this policy should change. Write the president a memo explaining your reasons.
2 Why is it important for managers to understand the concept of break-even points? Are there any drawbacks?