How much will I charge for MILK? Pricing Eagle Challenge Introduction Word of the Day Due today How much will I charge for MILK? Weebly KOSSA Standard OE6: Compare various pricing strategies and explain the goals of pricing

possession utility information utility form utility place utility Which economic utility increased when fast-food restaurants began accepting credit cards? possession utility information utility form utility place utility KOSSA Standard OE6: Compare various pricing strategies and explain the goals of pricing

The Steps of Price Planning Learning Objectives: The different forms of price The importance of price The goals of pricing The difference between market share and market position KOSSA Standard OE6: Compare various pricing strategies and explain the goals of pricing

The Steps of Price Planning Why It's Important Price is one of the four Ps of the marketing mix and is an essential element in marketing a product to the correct target market. **The goals of company and government regulations are two issues that must be considered in the pricing process** Understanding the steps involved in determining the price of a product is essential for business success. KOSSA Standard OE6: Compare various pricing strategies and explain the goals of pricing

FRIDAY price share market position return on investment KOSSA Standard OE6: Compare various pricing strategies and explain the goals of pricing

What Is Price? Price is the value of money (or its equivalent) placed on a good or service. It is usually expressed in monetary terms. The oldest form of pricing is the barter system—the exchange of a product or service for another product or service, without the use of money. KOSSA Standard OE6: Compare various pricing strategies and explain the goals of pricing

image—to some customers, high price equals quality Importance of Price Price is involved in every marketing exchange. It helps establish and maintain a firm's: image—to some customers, high price equals quality competitive edge—a business can attract customers by guaranteeing low prices profits—sales price is directly related to the price and number of items sold KOSSA Standard OE6: Compare various pricing strategies and explain the goals of pricing

Price per Item x Quantity Sold = Sales Revenue The Steps of Price Planning Projected Effects of Different Prices on Sales Price per Item x Quantity Sold = Sales Revenue An increase in the price of an item may not produce an increase in sales revenue. Why is this true? Are you more likely to buy a higher priced item or a lower priced item? $50 200 $10,000 $45 250 $11,250 $40 280 $11,200 $35 325 $11,375 $30 400 $12,000 $25 500 $12,500

The Steps of Price Planning Goals of Pricing Marketers’ pricing goals include: gaining market share achieving a certain return on investment meeting the competition KOSSA Standard OE6: Compare various pricing strategies and explain the goals of pricing

The Steps of Price Planning Gaining Market Share A business may engage in price competition to take market share from its competitors, forgoing immediate profits for long-term gains in market share. KOSSA Standard OE6: Compare various pricing strategies and explain the goals of pricing

The Steps of Price Planning Market Share Market share is a firm's percentage of the total sales volume generated by all competitors in a given market. Which brand has the largest share of the digital camera market? If total sales for this market are $3 billion, what is the sales revenue for the market leader? Do you have more confidence in a company that has a large market share? KOSSA Standard OE6: Compare various pricing strategies and explain the goals of pricing

The Steps of Price Planning Market Position Market position is the relative standing a competitor has in a given market in comparison to its competitors. Which brand is the market leader in the U.S. cookie market? Given total sales of $1,221 (in millions) for the U.S. cookie market, what is the leader's market share? Are you more inclined to buy a product if you know it is the market leader? Why?

The Steps of Price Planning Return on Investment Return on investment is a calculation used to determine the relative profitability of a product. The formula for calculating return on investment is Profit Investment Companies often price products to produce a certain return on investment. KOSSA Standard OE6: Compare various pricing strategies and explain the goals of pricing

The Steps of Price Planning Meeting the Competition Some companies simply aim to meet the prices of their competition, either by following the industry leader or meeting the industry average. Example: Automobiles and soft drinks have similar prices and compete based on other factors.

  Worksheet   KOSSA Standard OE6: Compare various pricing strategies and explain the goals of pricing

Pricing 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? KOSSA Standard OE6: Compare various pricing strategies and explain the goals of pricing

Vocab for Today markup cost-plus pricing one-price policy flexible-price policy skimming pricing penetration pricing KOSSA Standard OE6: Compare various pricing strategies and explain the goals of 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 KOSSA Standard OE6: Compare various pricing strategies and explain the goals of 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 KOSSA Standard OE6: Compare various pricing strategies and explain the goals of 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 KOSSA Standard OE6: Compare various pricing strategies and explain the goals of pricing

What is the markup? What is the Cost? Pricing Worksheet What is the markup? What is the Cost? KOSSA Standard OE6: Compare various pricing strategies and explain the goals of pricing

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 KOSSA Standard OE6: Compare various pricing strategies and explain the goals of pricing

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 KOSSA Standard OE6: Compare various pricing strategies and explain the goals of 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. KOSSA Standard OE6: Compare various pricing strategies and explain the goals of pricing

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 KOSSA Standard OE6: Compare various pricing strategies and explain the goals of 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. KOSSA Standard OE6: Compare various pricing strategies and explain the goals of pricing

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. KOSSA Standard OE6: Compare various pricing strategies and explain the goals of pricing