What is Price? What is Unit Comparison? (Give an example) Pricing How much will I charge for MILK? Bell Work: What is Price? What is Unit Comparison? (Give an example)

Pricing     Break Even - a point in a business venture when the profits are equal to the costs 7 minute Worksheet

Pricing Concepts Concepts The three basic pricing concepts involving cost, demand, and competition The concepts of pricing forward vs. pricing backward The idea of one-price policy vs. a flexible-price policy The two polar pricing policies for introducing a new product

Pricing Concepts Why It's Important After deciding on pricing goals, marketers must establish pricing strategies that are compatible with the rest of the marketing mix. Another term for Marketing Mix?

Vocab for Today markup cost-plus pricing one-price policy flexible-price policy skimming pricing penetration pricing

Basic Pricing Concepts There are three basic pricing concepts that you will want to consider in determining the price for any given product: cost-oriented pricing demand-oriented pricing competition-oriented pricing

Pricing Concepts Cost-Oriented Pricing In cost-oriented pricing, marketers first calculate the costs of acquiring or making a product and their expenses of doing business; then they add their projected profit margin to these figures to arrive at a price. Two common methods are: markup pricing cost-plus pricing

Pricing Concepts Cost-Oriented Pricing Markup pricing is used primarily by wholesalers and retailers who are involved in acquiring goods for resale. The markup must cover the business’s expenses. Price = cost + markup (as percentage) Cost-plus pricing is used by manufacturers and service companies. Price = all costs + all expenses (fixed and variable) + desired profit

Pricing Concepts Demand-Oriented Pricing Marketers who use demand-oriented pricing attempt to determine what consumers are willing to pay for given goods and services. Demand-oriented pricing is effective when: there are few substitutes for an item there is demand inelasticity

Pricing Concepts Competition-Oriented Pricing Marketers who study their competitors to determine the prices of their products are using competition-oriented pricing. These marketers may elect to take one of three actions: price above the competition price below the competition price in line with the competition (going-rate pricing) Tender Pricing

Pricing Concepts Pricing Policies A basic pricing decision every business must make is to choose between a one-price policy and a flexible-price policy. A one-price policy is one in which all customers are charged the same price for the goods and services offered for sale. A flexible-price policy permits customers to bargain for merchandise.

Pricing Concepts New Product Introduction A business may elect to price a new product above, in-line, or below its competitors. When a going-rate strategy is not used, two polar methods may be used: skimming pricing penetration pricing

Pricing Concepts New Product Introduction Skimming pricing is a pricing policy that sets a very high price for a new product to capitalize on the initial high demand for a new product. Advantages: High profit margin; may cover research and development costs. Disadvantages: Cost must eventually be lowered; attracts competition; if price is too high no one buys.

New Product Introduction Penetration pricing sets the initial price for a product very low to encourage as many people as possible to buy the product. Advantages: Quick market penetration; can capture a large market; blocks competition. Disadvantages: Low demand leads to big losses.