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Price optimization utilizes data analysis to predict the behavior of potential buyers to different prices of a product or service. Depending on the type of methodology being implemented, the analysis may leverage survey data (e.g. such as in a conjoint pricing analysis [7]) or raw data (e.g. such as in a behavioral analysis leveraging 'big data' [8] [9]).
Some practitioners of PCM are mostly concerned with the cost of the product up until the point that the customer takes delivery (e.g. manufacturing costs + logistics costs) or the total cost of acquisition. They seek to launch products that meet profit targets at launch rather than reducing the costs of a product after production.
For instance, taking the first definition, if it costs a firm $400 to produce 5 units and $480 to produce 6, the marginal cost of the sixth unit is 80 dollars. Conversely, the marginal income from the production of 6 units is the income from the production of 6 units minus the income from the production of 5 units (the latter item minus the ...
Every decision in the product development process affects cost: design is typically considered to account for 70–80% of the final cost of a project such as an engineering project [1] or the construction of a building. [2] In the public sector, cost reduction programs can be used where income is reduced or to reduce debt levels. [3]
Also called resource cost advantage. The ability of a party (whether an individual, firm, or country) to produce a greater quantity of a good, product, or service than competitors using the same amount of resources. absorption The total demand for all final marketed goods and services by all economic agents resident in an economy, regardless of the origin of the goods and services themselves ...
Target costing is defined as "a disciplined process for determining and achieving a full-stream cost at which a proposed product with specified functionality, performance, and quality must be produced in order to generate the desired profitability at the product’s anticipated selling price over a specified period of time in the future."
In economics, a cost curve is a graph of the costs of production as a function of total quantity produced. In a free market economy , productively efficient firms optimize their production process by minimizing cost consistent with each possible level of production, and the result is a cost curve.
Cost function In economics, the cost curve , expressing production costs in terms of the amount produced. In mathematical optimization, the loss function , a function to be minimized.