Page 29 - MARKETING MIX

What is PRICING

Break-even

Pricing

The break-even price is

when the money

received from the sale of

a product covers the

expenses associated

with producing that

product.

How it

works

The gross profit or

contribution that the Break-even:

sale provides toward calculation

balancing fixed costs is

the selling price less the

variable cost.

Hotels use this concept

of contribution margin

to set rates when

demand drops. They set

low rates, rationalizing

that at least they are

covering their variable

costs, effective if it

creates additional

demand. During good

times, some hotels aim to

steal business by

lowering rates.

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