Download Business in Global Markets

Ass. Prof. Dr. Özgür KÖKALAN
İstanbul Sabahattin Zaim University
Chapter Objectives
Define price and list the elements affecting pricing
strategy
2. Describe the types of pricing
1.
5-2
PRICE IN THE MARKETING MIX
 Price: exchange value of a good
or service
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Developing Pricing Strategies
 Seven Factors Affecting Pricing Decisions
 Marketing Objectives
 Government Regulations
 Consumer Perceptions
 Manufacturing and Selling Costs
 Competition
 Consumer Demand
 Wholesalers and retailers needs
Figure 14.11
Alternative
Pricing
Objectives
Profitability Objectives
 Perhaps the most commonly
used objective in firms’ pricing
strategies
 Some firms try to maximize
profits by reducing costs rather
than through price changes
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Volume
Objectives
 Bases pricing decisions on
market share
 Market share: the percentage
of a market controlled by a
certain company or product
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Pricing to Meet Competition
 Third set of pricing
objectives
 Seeks to meet competitors’
prices
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Prestige Objectives
 Prestige pricing encompasses the
effect of price on prestige
 Prestige pricing establishes a
relatively high price to develop
and maintain an image of quality
and exclusiveness
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HOW PRICES ARE DETERMINED
 Determined in two basic ways:
 By applying the theoretical concepts of
supply and demand
 By completing cost analyses
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Price Determination in Practice
 Cost-based pricing formulas: formulas
calculate base-cost figures per unit and
then add markups to cover overhead costs
and generate profits
 Simpler and easier to use than economic
theory-based pricing
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Breakeven Analysis
 Breakeven analysis: pricing technique
that determines the sales volume that a firm
must achieve at a specified price in order to
generate enough revenue to cover its total
cost
Finding the Breakeven Point
Breakeven point
Total Fixed Cost
= Contribution to Fixed Costs Per Unit
(in units)
Breakeven point
(in dollars) =
Total Fixed Cost
1 – Variable Cost Per Unit/Price
Alternative Pricing Strategies
•
Skimming
•
Skimming pricing
strategy: sets a high price
relative to the prices of
competing products
Often works for introduction
of a distinctive good or
service with little or no real
competition
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Alternative Pricing Strategies
•
Skimming
Penetration
•
Penetration pricing
strategy: sets a low price as
a major marketing weapon
Assumes that a belowmarket price will attract
buyers and move a brand
from an unknown newcomer
to at least a brand
recognition or even a brand
preference stage
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Alternative Pricing Strategies
Skimming
Penetration
Competitive
•
•
Competitive pricing
strategy: product priced at
the general level of
competing offerings
Attempts to reduce the
emphasis on price and
concentrates marketing
efforts on product,
distribution, and promotion
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CONSUMER PERCEPTIONS
OF PRICES
 Psychological Pricing
 Odd pricing (charging
$39.95 or $19.98 instead of
$40 or 20)
 Commonly-used retail
practice, as many retailers
believe that consumer favor
uneven amounts
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