Marketing_Prelim3_Study_Guide

Marketing_Prelim3_Study_Guide - ch13 building the price...

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ch13: building the price foundation NATURE AND IMPORTANCE OF PRICE     Tutition – education Rent – apartment Interest – bank credit card Premium – car insurance Fee – physician/dentist Dues – professional/social organization Fare – airline Salary – business Commission – salesperson Wage – worker Price – clothes/haircut Price:  is the money or other considerations (including other goods and services)  exchanged for the ownership or use of a good or service Barter:  the practice of exchanging goods and serices for other goods and servies  rather than for money Bc of discounts, allowances, and extra fees the amount paid for products is not  always the same as the list or quoted price “special fees” or “surcharges” raise the real price price equation – key consideration when you buy your enxt car
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PRICE = LIST PRICE – INCENTIVES & ALLOWANCES + EXTRA FEES  Value:  the ratio of perceived benefits or price VALUE = PERCIEVED BENEFITS               PRICE for a given price, as perceived benefits increase, value increases value-pricing:  the practice of simultaneously increasing product and service  benefits while maintaing or decreasing price for some products, price influences consumers’ perception of overall quality  and ultimately its value to consumers “value” involves the judgment by a consumer of the worth and desirability of a  product or service relative to substitutes that satisfy the same need “reference value” emerges, involves comparing the costs and benefits of  subsititute items “supersizing” etc profit equation: PROFIT = TOTAL REVENUE – TOTAL COST        (unit price x quantity sold) – (fixed cost + variable cost) pricing decisions influence both total revenue (sales) and total cost – pricing is one  of the most important decisions marketing executives face SIX MAJOR STEPS IN SETTING PRICES 1. identify pricing objectives and constraints
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objectives, like profit, market share, and survival constraints like demand for product class and brand, newness, costs, and  competition 2. estimate demand and revenue demand estimation sales revenue estimation price elasticity estimation 3. determine cost, volume, and profit relationships cost estimation marginal analsis, in relation to profit break-even analysis, in relation to profit 4. select and appropriate price level 5. set list or quoted price 6. make special adjustments to list or quoted price STEP ONE: IDENTIFYING PRICING OBJECTIVES AND CONSTRAINTS pricing objectives:
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