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Transcript
Managing Pricing Perceived Benefits + Objective Price + Perception of Price + + Perceived Value Willingness to Buy - Perceived Sacrifice Price and Perceived Value The Three C’s Model for Price Setting Low Price No possible profit at this price Costs Competitors’ p prices and prices of substitutes Customers’ High g Price assessment No possible of unique demand at product this price features Types of Costs Fixed Costs (Overhead) Variable Costs Costs that don’t vary with sales or production levels. Costs that do vary directly with the level of production. Executive Salaries Rent Raw materials Total Costs Sum of the Fixed and Variable Costs for a Given Level of Production 1 Break-Even Analysis Total Fixed Cost Break-Even Point = Contribution Per Unit to Fixed Cost (P-VC) Price Elasticity of Demand Pricing Setting Process 1. Selecting the pricing objective 2. Determining demand 3. Estimating costs 4. Analyzing competitors’ costs, prices, and offers 5. Selecting a pricing policy and method 6. Selecting final price 2 Price - Quality Strategies Price Quality Higher Lower Higher Lower Premium S Strategy Good-Value S Strategy Overcharging Strategy Economy Strategy Initial Product Pricing Strategies Skimming Price Penetration Price > Setting a High Price for a New Product to Skim Maximum Revenues from the Target Market. > Setting a Low Price for a New Product in O d to Order t Attract Att ta Large Number of Buyers. > Results in Fewer, More Profitable Sales. > Results in a Larger Market Share. > Ex.: Generic drugs > Ex.: Plasma HDTVs Product Mix Pricing Strategies Product Line Pricing Setting Price Steps Between Product Line Items i.e. $299, $399 Optional--Product Pricing Optional Product Mix Pricing Strategies Pricing Optional or Accessory Products Sold With The Main Product i e Car Options i.e. Captive--Product Pricing Captive Pricing Products That Must Be Used With The Main Product i.e. Razor Blades, Film, Software Product--Bundle Pricing Product Pricing Bundles Of Products Sold Together i.e. Season Tickets, Computer Makers 3 Psychological Pricing Prestige Pricing Loss-Leader LossPricing Odd-Even OddPricing Product Line Pricing Psychological Pricing Prestige Pricing Loss-Leader LossPricing Odd-Even OddPricing Product Line Pricing Ê Pricing at relatively high levels so as to convey an image of high quality or exclusivity Demand Curves for Normal and Prestige Products 4 Psychological Pricing Prestige Pricing Loss-Leader LossPricing Odd-Even OddPricing Product Line Pricing Ê Offers products at prices below or near cost to attract consumers from competitors’ stores Psychological Pricing Prestige Pricing Loss-Leader LossPricing Odd-Even OddPricing Product Line Pricing Ê Ê Price lining is marketing multiple products at different price points Bundling is marketing two or more products in a single package for a special price Psychological Pricing Prestige Pricing Loss-Leader LossPricing Odd-Even OddPricing Product Line Pricing Ê Ê Odd pricing refers to a price ending with an odd number just under a round number Even pricing is used to convey high quality 5 Professional Pricing Standard Fee regardless of the problem involved Ê Used to convey an image of professional ethical responsibility Ê 6