The three major considerations in price setting are: costs set a "floor" to the price; ________; and customers' assessment of unique features establishes the price ceiling.
A) the price of competitors and substitutes
B) the price of substitutes establishes a "target price"
C) competitors' prices and the price of substitutes provide an orienting point
D) competitors' prices establishes a "target price" goal
E) competitors' target-costing

Question

Quizplus · Accepted Answer

Competitors' prices and the price of substitutes provide an orienting point, meaning that they help to give a general idea of what customers are willing to pay for the product. However, costs set a "floor" to the price because the company needs to cover its expenses and make a profit, and customers' assessment of unique features establishes the price ceiling because they may be willing to pay more for certain unique features or benefits of the product. The other choices are either partially correct or incorrect. For example, while competitors' prices may provide a "target price" goal, this is not the only consideration in price setting. Also, target costing is a cost management technique, not a consideration in price setting.

The Three Major Considerations in Price Setting Are: Costs Set