How much will I charge for MILK? Pricing How much will I charge for MILK? Eagle Challenge Review of Pricing Weebly LT: Define the nature and scope 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

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

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.

FRIDAY price share market position return on investment

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.

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

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

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.

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?

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.

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  

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?

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 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 penetration pricing sets the initial price for a product very low to encourage as many people as possible to buy the product.

Psychological Pricing Psychological pricing refers to techniques that create an illusion for customers or that make shopping easier for them. Common psychological pricing techniques are: odd-even pricing prestige pricing multiple-unit pricing bundle pricing promotional pricing everyday low prices (EDLP) price lining

Psychological Pricing Odd-even pricing involves setting prices that end in either odd or even numbers. Odd numbers convey a bargain image; even numbers convey quality. Prestige pricing involves setting higher-than-average prices to suggest status and prestige.

Psychological Pricing Multiple-unit pricing involves pricing items in multiples to suggest a bargain and increase sales volume. Bundle pricing involves including several complementary products in a package and pricing them lower as a group than if they were bought separately.

Psychological Pricing Promotional pricing is generally used in conjunction with sales promotions when prices are lower than average. Loss-leader pricing provides items at cost to attract customers. In special-event pricing, prices are reduced for a short period of time, such as a holiday sale.

Psychological Pricing Everyday low prices (EDLP) are low prices that are set on a consistent basis with no intention of raising them or offering discounts in the future. Price lining involves offering all merchandise in a given category at certain prices, such as $25, $35, and $50.

Setting Prices Discount Pricing Discount pricing involves the seller's offering reductions from the usual price. They include: cash quantity trade seasonal discounts promotional discounts and allowances

Discount Pricing Cash discounts are offered to buyers to encourage them to pay their bills quickly. Quantity discounts are offered to buyers for placing large orders. Noncumulative quantity discounts are offered on one order. Cumulative quantity discounts are offered on all orders over a specified period of time.

Discount Pricing Seasonal discounts are offered to buyers willing to buy at a time outside the customary buying season. Promotional discounts are offered to wholesalers and retailers willing to advertise or promote a manufacturer's products. Allowances are granted to customers for selling back an old model.

Steps in Setting Prices These are the six steps in determining a price for an item: 1. Determine pricing objectives. 2. Study costs. 3. Estimate demand. 4. Study competition. 5. Decide on a pricing strategy. 6. Set price.

Types of Psychological Pricing Odd- Even Pricing Prestige Pricing Price Lining Psychological Pricing Everyday Low Prices (EDLP) Multiple- Unit Pricing Bundle Pricing Promotional Pricing