Downloaded 334 times
Uploaded byAmaie Idarus
Chapter 11 (pricing concept)
This document summarizes key concepts from a chapter on pricing in a marketing fundamentals course. It discusses pricing objectives like profit maximization, sales maximization, and maintaining status quo. It also covers determining price based on demand, including factors that impact elasticity, and based on costs like variable and fixed costs. Methods for setting prices like markup pricing, break-even pricing, and target return pricing are presented. Finally, other determinants of price are listed such as the product life cycle stage, level of competition, distribution and promotion strategies, and perceived quality.
More Related Content
Similar to Chapter 11 (pricing concept)
Chapter 11 (pricing concept)
- 1. Fundamental Of Marketing MKT243 Chapter 11 Pricing Concept DHD2009 MKT243 Fundamental Of 1 Marketing
- 2. Slide Outline • PricingObjective • Demand determination of price • Cost determination of price • Other determination of price DHD2009 MKT243 Fundamental Of 2 Marketing
- 3. What Is aPrice? Price is the amount of money charged for a product or service. It is the sum of all the values that consumers give up in order to gain the benefits of having or using a product or service. Price is that which is given up in an exchange to acquire a product and service Price is the only element in the marketing mix that produces revenue; all other elements represent costs DHD2009 MKT243 Fundamental Of 3 Marketing
- 4. The Importance ofPrice Revenue = Unit Price Number of units sold Revenue pays for every activity. What’s left over is Profit. Price Low High = Price Price Perceived Value DHD2009 MKT243 Fundamental Of 4 Marketing
- 5. Profit-Oriented Pricing Objectives Profit-Oriented Pricing Objectives Profit-Oriented Pricing Objectives Target Target Profit Profit Satisfactory Satisfactory Return on Return on Maximization Maximization Profits Profits Investment Investment DHD2009 MKT243 Fundamental Of 5 Marketing
- 6. Pricing Objectives 1. Profit –Oriented Pricing Objective i. Profit Maximization -Setting prices so that Total Revenue is larger as possible -As long as the revenue exceed the cost ii. Satisfactory profits -Setting prices so that company gets a reasonable level of profits or consistent profits -Level of profit must be consistent with the level of the risk that the organization have to face iii. Target return on Investment/ROI -The higher the ROI, the better off the firms is -High risk, High return (finance theory) DHD2009 MKT243 Fundamental Of 6 Marketing
- 7. Sales-Oriented Pricing Objectives Sales-Oriented Pricing Objectives Sales-Oriented Pricing Objectives Market Market Sales Sales Share Share Maximization Maximization DHD2009 MKT243 Fundamental Of 7 Marketing
- 8. Pricing Objectives 2. Sales-Oriented Pricing Objective i. Market share-is a company’s sales as a percentage of total sales for the industry ii. Sales Maximization-Maximizing sales, ignores profits, competition and marketing environment as long as sales are rising DHD2009 MKT243 Fundamental Of 8 Marketing
- 9. Status Quo Pricing Objectives Status Quo Pricing Objectives Status Quo Pricing Objectives Maintain Maintain Meet Meet existing existing competition’s competition’s prices prices prices prices DHD2009 MKT243 Fundamental Of 9 Marketing
- 10. Pricing Objectives 3. Status-Quo Pricing Objective i. A pricing objective that maintains existing prices or meets competitor’s price ii. Keep monitoring competitor’s prices, compare prices and make adjustments iii. Based on the competitor prices DHD2009 MKT243 Fundamental Of 10 Marketing
- 11. Demand and Supply The quantity of a product that The quantity of a product that Demand Demand will be sold in the market at various will be sold in the market at various prices for a specified period. prices for a specified period. The quantity of a product The quantity of a product Supply Supply that will be offered to the market that will be offered to the market by a supplier at various prices by a supplier at various prices for a specific period. for a specific period. DHD2009 MKT243 Fundamental Of 11 Marketing
- 12. Elasticity of Demand Elastic Consumers buy more or less Elastic of a product when the Demand Demand price changes Inelastic An increase or decrease in Inelastic price will not significantly Demand Demand affect demand An increase in sales exactly Unitary Unitary offsets a decrease in prices, Elasticity Elasticity and revenue is unchanged DHD2009 MKT243 Fundamental Of 12 Marketing
- 13. Factors that AffectElasticity of Demand Availability of substitutes Availability of substitutes Price relative to Price relative to purchasing power purchasing power Product durability Product durability A product’s other uses A product’s other uses DHD2009 MKT243 Fundamental Of 13 Marketing
- 14. The Cost Determinantof Price Types of Costs Types of Costs Variable Variable Fixed Costs Fixed Costs Costs Costs DHD2009 MKT243 Fundamental Of 14 Marketing
- 15. The Cost Determinantof Price Markup pricing Markup pricing Keystoning Keystoning Methods Methods Used to Used to Profit Maximization Profit Maximization Set Prices Set Prices Pricing Pricing Break-Even Break-Even Pricing Pricing Target-Return Target-Return Pricing Pricing DHD2009 MKT243 Fundamental Of 15 Marketing
- 16. Break-Even Pricing Total Revenue fi t Pro 4,000 Total Costs Break-even point Price s L os 2,000 Fixed costs 0 1,000 2,000 3,000 4,000 5,000 6,000 Quantity DHD2009 MKT243 Fundamental Of 16 5 Marketing
- 17. Other Determinants ofPrice Stages of the Stages of the Product Life Cycle Product Life Cycle Competition Competition Distribution Strategy Distribution Strategy Promotion Strategy Promotion Strategy Perceived Quality Perceived Quality DHD2009 MKT243 Fundamental Of 17 Marketing