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Uploaded bySoumit Biswas
IMP
This document outlines the key steps in setting a price: 1) select pricing objectives like maximizing profits or market share, 2) determine demand by estimating demand curves and price elasticity, 3) estimate costs like fixed, variable, and average costs, 4) analyze competition on factors like costs and prices, 5) select a pricing method such as markup or target-return pricing, and 6) select the final price considering additional factors like psychological pricing and the impact on other parties. Conditions where consumers are less price sensitive include distinctive products, lack of substitutes awareness, and small expenditures compared to income. Demand is less elastic when there are few substitutes and buyers do not readily notice price changes.
IMP
- 1. Setting the Price PricingProcedure • Select pricing objective • Determine demand • Estimate costs • Analyze competition • Select pricing method • Select final price • Survival • Maximize current profits • Maximize market share • Penetration strategy • Market skimming • Skimming strategy • Product quality leaders • Partial cost recovery
- 2. Setting the Price PricingProcedure • Select pricing objective • Determine demand • Estimate costs • Analyze competition • Select pricing method • Select final price • Understand factors that affect price sensitivity • Estimate demand curves • Understand price elasticity of demand • Elasticity • Inelasticty
- 3. Marketing Strategies Conditions UnderWhich Consumers are Less Price Sensitive: • Product is more distinctive • Buyers are less aware of substitutes • Buyers cannot easily compare quality of substitutes • The expenditure is a lower part of buyer’s total income • The expenditure is small compared to the total cost • Part of the cost is borne by another party • The product is used with assets previously bought • The product is assumed to have more quality, prestige, or exclusiveness • Buyers cannot store the product
- 4. Marketing Strategies Conditions UnderWhich Demand is Less Elastic: • There are few or no substitutes • Buyers do not readily notice the higher price • Buyers are slow to change their buying habits and search for lower prices • Buyers think higher prices are justified
- 5. Setting the Price PricingProcedure • Select pricing objective • Determine demand • Estimate costs • Analyze competition • Select pricing method • Select final price • Types of costs and levels of production must be considered • Accumulated production leads to cost reduction via the experience curve • Differentiated marketing offers create different cost levels
- 6. Key Pricing Terms: Fixedcosts: do not vary directly with changes in level of production Variable costs: vary with production Total costs: sum of fixed and variable costs a given level of production Average cost: cost per unit at a given level of production Setting the Price
- 7. Setting the Price PricingProcedure • Select pricing objective • Determine demand • Estimate costs • Analyze competition • Select pricing method • Select final price • Firms must analyze the competition with respect to: • Costs • Prices • Possible price reactions • Pricing decisions are also influenced by quality of offering relative to competition
- 8. Setting the Price PricingProcedure • Select pricing objective • Determine demand • Estimate costs • Analyze competition • Select pricing method • Select final price • Price-setting begins with the three “C’s” • Select method: • Markup pricing • Target-return pricing • Perceived-value pricing • Value pricing • Going-rate pricing • Auction-type pricing • Group pricing
- 9. Setting the Price PricingProcedure • Select pricing objective • Determine demand • Estimate costs • Analyze competition • Select pricing method • Select final price • Requires consideration of additional factors: • Psychological pricing • Gain-and-risk-sharing pricing • Influence of other marketing mix variables • Company pricing policies • Impact of price on other parties