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Pricing in Practice
Pricing in Practice
Pricing in Practice
Pricing in Practice
Pricing in Practice
Pricing in Practice
Pricing in Practice
Pricing in Practice
Pricing in Practice
Pricing in Practice
Pricing in Practice
Pricing in Practice
Pricing in Practice
Pricing in Practice
Pricing in Practice
Pricing in Practice
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Pricing in Practice

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marketing management ppt presentation on pricing

marketing management ppt presentation on pricing

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  • 1.  The money charged for a product or service  Everything that a customer has to give up in order to acquire a product or service A price is a charge made by a producer to a consumer for the right to be supplied with a good or service. tariffs, charges, premiums and interest rates are prices in the appropriate context.
  • 2. achieve the financial goals of the company – profitability fit the environment – will customers buy at that price? support the products positioning be consistent with other variables of the marketing mix
  • 3. Dominant Firm Pricing & Consumer Surplus A dominant firm acting as a monopolist, aiming to maximize profits and using a single price will equate marginal revenue to marginal cost and set the appropriate price for that output. Price Discrimination Price discrimination involves exploiting demand characteristics that allow the same product t o be sold at various prices unrelated to the cost of supply. In practice a single consumer may be charged different prices for different units of good bought or different consumers may be charged different prices for the same product or service.
  • 4. Select the price objective Steps in Setting Price
  • 5. • Pricing such that you cover variable costs and some fixed costs. Short-term objectiveSurvival • Price your product to maximize current profit Maximum current profit • Set lowest price to maximize volume / market share. Assumes market is price-sensitive Maximum market share (Penetration) • Sell base product at low margin, locking consumers into higher margin after-market consumables Captive Pricing (Penetration) • Prices start high and slowly lowered over time. Highly demanded product Maximum market skimming • Product with high quality, taste, status – priced just high enough not to be out of consumer’s reach Product-quality leadership • Priced so only the wealthy can afford itPrestige Pricing
  • 6. • Add a standard mark up to the product’s cost. Markup pricing • Determine price that would deliver company’s target rate of return on investmentTarget-return pricing • Price based on the value to the customer (i.e. if new product innovation saves money, then should charge more) Perceived-value pricing • Pricing to win loyal customer by charging fairly low price for high qualityValue pricing • Price solely based on competitors prices Going-rate pricing
  • 7. CUSTOMER DEMAND MARKETING MIX STATE OF THE ECONOMY CUSTOMER PERCEPTION OF VALUE
  • 8. Two main methods of calculating price based on average variable costs. • The first, the full cost method, involves estimating the average variable (or average direct) costs for a chosen or normal output and then adding average fixed or (average indirect) cost s and an average profit margin. • The second method involves estimating the average variable or (average direct) costs for a chosen or normal output and then adding a costing margin to cover indirect costs and deliver the desired profit margin.
  • 9. Short-run increases in demand will not influence price. If the firm cannot increase output to meet an increase in demand, then it will adopt a rationing or queuing system to allocate output. Cost-plus pricing: responses to cost, demand and tax changes
  • 10. Pricing intervals • Firms may attempt to position the price of their product relative to a similar but different product. Relative pricing •A change in the price of one product may affect sales of both its own and other firms’ products. Where products are complements, firms may have to decide on a pricing structure and whether to sell the goods separately or to bundle them together. Product line pricing • Setting prices for new products presents greater difficulties, as there is no previous experience of the costs of production or of the likely level of demand. New products

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