1. 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

2. 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

3. 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

4. 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.

5. FRIDAY
price
share
market position
return on investment

6. 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.

7. 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

8. 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?
$ $10,000
$ $11,250
$ $11,200
$ $11,375
$ $12,000
$ $12,500

9. The Steps of Price Planning
Goals of Pricing
Marketers’ pricing goals include:
gaining market share
achieving a certain return on investment
meeting the competition

10. 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.

11. 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?

12. 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?

13. 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.

14. 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.

15. Worksheet

16. 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?

17. 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

18. 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

19. 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

20. 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

21. 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

22. 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.

23. 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.

24. 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

25. 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.

26. 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.

27. 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.

28. 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.

29. 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

30. 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.

31. 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.

32. 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.

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