mktg pricing08 students

8/13/2019 Mktg Pricing08 Students

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Price -- Definition

the amount of money charged for a product orservice

the sum of all the values that consumers

exchange for the benefits of having or usingthe product or service

Examples of price?

Tuition, rent, fare, retainer, toll, salary/wage, dues


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Prices -- BU113 Companies

What objectives did the managers have in

mind when they set their prices?
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Pricing Objectives

MeetBusiness

Objectives

Other Pricing Objectives Status Quo

Image

Social & Ethical Considerations


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Price Strategies for New Products

PRICE

PRICE

PRICE

Skimming Penetration

Penetration Pricing

SkimmingPricing

Low priceestablish

product in the market

High price/Prestigepricing

appeal to early

adopters; recover high

R&D costsLower price over time

Move inventory, stimulate

D, extend product life


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Marketing Strategy Over the Product Life Cycle

INTRODUCTION GROWTH MATURITY DECLINEMarketing strategy Market development Increase market Defend market Maintain efficiency in

emphasis share share exploiting product

Promotion Mount sales Appeal to Emphasize Reinforce loyal

Strategy promotion for mass market brand differences, customers; reduceproduct awareness benefits & loyalty promotion costs

Place strategy Distribute through Build intensive Enlarge Be selective inselective outlets network of distribution distribution, trim

outlets network unprofitable outlets

Pricing High price/unique Lower price Price at or below Set price to

strategy product / cover over time competition remain profitableproduction costs or

reduce to

Low price/gain liquidate

market share


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Price-

Setting

Tools

EconomicSupply/Demand

Determining Prices


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Elasticity of Demand

measure of the sensitivity of demand to changes in prices

not price sensitive - no real change in demand price sensitive - changes in demand

Inelastic Demand

Q2 Q1 Quantity

P1P2

ElectricityPrice

Elastic Demand

Q2Quantity

P1P2

Fast food

Q1

Price


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Market-based Pricing

Pricing Existing Products/Services- 3 options

Pricingbelowmarket prices price wars

EX: airlines, store brand vs. manufacturers brand Dumping

Pricingaboveprevailing market prices for

similar products

EX: Sony higher price = higher quality?

Pricingat or nearmarket prices


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Pricing Tactics

Price Lining

Price points: Setting a limited number of prices for

certain categories of products

Psychological Pricing Odd-even

Discounting

Quantity discounts Cash discounts (2/10 net 30)

Web programs: free!


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Cost-based Pricing (Cost-Plus)

1. Cover costs Material

Labor

Capital resources Marketing

2. Mark-up

Targeted return for shareholders

Costs+ mark-up = Sales price

$1.00 + $0.50 = $1.50 (50% markup)

variable costs

fixed costs


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Breakeven Point Formula

(Contribution Margin)

cost/unitVariable

Price/unit

CostsFixed

QUANTITYBREAKEVEN


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Review

5 Factors that influence prices

Pricing objectives

Pricing strategies at different stages of the

Product Life Cycle (advantages/disadvantages)

Methods of Determining Prices

Elasticity of demand

Mark-up

Breakeven Analysis

mktg pricing08 students

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