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Bsbmkg502 b session ib


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  • 1. BSBMKG502B – Establish and adjust themarketing mixPresentation OnePriceSecond of the Four P’s Product (and service) Price Promotion Place(ment)
  • 2. PRICINGand setting prices
  • 3. FACTORS TO CONSIDER WHENSETTING PRICES• Marketing Objectives • survival especially in marginal businesses • Current Profit Maximisation – focus on short term results over long term performance • Market-share leadership – affects price when company seeks to dominate the market • Product Quality Leadership – tends to push prices higher – often a nicher strategy • Other objectives – • low pricing to keep out competitors, • social pricing in not-for-profit organisations
  • 4. MARKETING MIX STRATEGY• Price must reflect overall marketing mix strategy• Price must support the overall positioning strategy targeted by the marketing mix
  • 5. The role of cost in pricing• Costs determines the bottom level of price• Types of cost: • Fixed costs e.g. electricity • Variable costs e.g. petrol • Costs at different levels of production – break-even and economies of scale • cost as a function of production experience – the learning curve
  • 6. The Market & Demand• Pricing in different market situations: • Pure competition many buyers & sellers, no one is more powerful - going rate is the rule • Monopolistic Competition – many buyers & sellers trading over a range of prices, products differentiated by quality, features, styles • Oligopolistic competition – few sellers each responding to the other, barriers to entry prevent new competition. • Pure monopoly – single seller, sometimes regulated, high barriers of entry
  • 7. Consumer Perception of Price &Value• Consumers ultimately decide prices• Marketers must combine creative judgement and technical expertise with an awareness of buyer’s motivation to set prices• Marketers must be aware of demand curves – relationship between price and demand
  • 8. Competitor’s Prices and Offers• Some companies have a policy to match competitors prices• Others respond with increased service or performance
  • 9. General Pricing approaches• Cost Based • Cost-Plus – standard mark-up • Break-even analysis and Target Profit Pricing –• Value Based Pricing • Buyer’s perception of value, not seller’s costs non-price variables in the marketing mix are used to build up buyer’s perception of the product
  • 10. General Pricing approaches (cont)• Competition Based Pricing • Economic Value Pricing cost that extend beyond base price eg industry purchaser might look at installation, maintenance, training, consumables costs • Going-Rate Pricing – based on competitors prices
  • 11. Relationship Pricing• Special Relationship Working with customers to reduce time and costs whilst improving quality. Working closely together to plan operations to facilitate ‘just-in-time’ operations.• Enrichment Working with customers to enhance their operations, possibly through re-engineering processes then sharing increased profits resulting from cost savings• Shared Risk & Reward Forming strategic alliances to enhance customer operations with shared risk & reward.
  • 12. New Product Pricing Strategies• Innovative New Product • Market-Skimming – setting a high price to gain maximum revenue from the segments willing to pay high prices • Market Penetration – setting a lower price to gain maximum market share
  • 13. Pricing an Imitative product• Must determine strategy against current players to position product on quality and price e.g. Ipad imitation
  • 14. Product/Service Mix Pricing• Product/service line pricing • Setting steps between product and service line items• Optional product/service pricing • Pricing optional or accessory products sold with main product/service• Captive product/service pricing • Pricing products and services that must be used with the main product /services
  • 15. Product/Service Mix Pricing (cont)• By-product Pricing • Pricing low-value by-products or services to get rid of them e.g. Timber mill selling offcuts as firewood• Product/service-bundle pricing • Pricing bundles of products or services sold together e.g. Bags of potatoes,fruit.
  • 16. Price Adjustment Strategies• Discount Pricing and allowances • Reduced prices to reward customer responses such as paying early or to promote the product • Discounts can be cash, quantity, functional, seasonal • Allowances might be : trade-in, Promotional• Segmented Pricing • Adjusting prices to take into account differences in customers, locations & products e.g. Wealthier suburbs hair salon charges more than less wealthy suburbs’ salon.• Psychological Pricing • Adjusting prices for psychological effect E.g. $2.98 seen as cheaper than $3.00.
  • 17. Price Adjustment Strategies (cont)• Promotional Pricing • Temporarily reducing prices to increase short-run sales• Value pricing • Adjusting prices to offer the right combination of quality and service at a fair price• Geographical Pricing • Adjusting prices to the geographical location of customers can use FOB (free on board) pricing (charge more to transport goods to remote areas), Uniform delivery pricing, Zone pricing, Base-point pricing, freight absorption• International Pricing • adjusting prices for international markets
  • 18. Conclusion• Logistics management requires great trade-offs between functional units• Management must focus on communication and strategic objectives to ensure co-operation• Distribution can often be that part of the mix which irritates the customer the most e.g. failed deliveries, damaged goods, wrong orders ....