Ch 10 review - Ch 10 Price The amount of money charged for...

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Unformatted text preview: Ch. 10 Price: The amount of money charged for a product or service; the sum of the values that customers exchange for the benefits of having or using the product or service. 是一种产品 或服务的标价,是消费者为了换取获得和使用产品或服务的利益而支付的价值。 Price is the only element in the marketing mix that produces revenue, all other element represent costs, is also one of the most flexible marketing mix elements. Price has direct impact on a firm’s bottom line. And price plays a key role in creating customer value and building customer relationship. Price ceiling (价格上线): no demand above this price Product costs: no profits below this price • 3 major pricing strategies 1) Customer value-­‐based pricing: Setting price based on buyers’ perception (看法) of value rather than on the seller’s cost. -­‐-­‐-­‐Pricing begins with analyzing consumer needs and value perceptions, and the price is set to match perceived value. Good value pricing: offers the right combination of quality and good service at a fair price. Good value pricing has involved redesigning existing brands to offer more quality for a given price or the same quality for less. An important type of good value pricing at the retail level is everyday low pricing, it’s involves charging a constant, everyday low price with few or no temporary price discounts. Value-­‐added pricing: attaching value added features and services to differentiate a company’s offers and charging higher pries. Cutting prices to match competitors. High-­‐low pricing: charging higher prices on an everyday basis but running frequent promotions to lower prices temporarily on selected items. Segmented pricing: is used when a company sells a product at two or more process even though the difference is not based on cost. 2) Cost-­‐based pricing: Setting prices based on the costs for producing, distributing, and selling the product plus a fair rate of return for effort and risk. -­‐-­‐-­‐Companies with lower costs can set lower prices that result in smaller margins but greater sales and profits. Types of costs: FC: costs that do not vary with production or sales level. (company must pay bill each month for rent, heat, interest, salaries) VC: costs that vary directly with the level of production (cost of plastic, microprocessor chips, and packaging, total varies with the # of units produced) TC: the sum of the fixed and variable costs for any given level of production Cost-­‐plus pricing (markup pricing): adding a standard markup to the cost of the product. Unit cost = VC + FC/unit sales Markup price = unit cost / (1 – desired return on sales) Break-­‐even pricing: setting price to break even on the costs of making and marketing a product or setting price to make a target return. Break-­‐even= FC/(price -­‐ VC) 3) Competition-­‐based pricing: Setting prices based on competitors’ strategies, prices, costs, and market offerings. -­‐-­‐-­‐In assessing competitors’ pricing strategies, should ask: 1. How does the company’s market offering compare with competitors’ offering in terms of customer value? 2. How strong are current competitors, and what are their current pricing strategies. • Elastic and inelastic demand curves: Price elasticity of demand = % change in quantity demanded/ %change in price inelastic demand: demand hardly changes with a small change in price Elastic demand: demand changes greatly with a small change in price. (lower price produce more revenue) Buyers are less price sensitive when the product they are buying is unique or when it’s high in quality, prestige, or exclusiveness, substitute products are hard to find or when they cannot easily compare the quality of substitutes, and the total expenditure for a product is low relative to their income or when the cost is shared by another party. Internal and external consideration the market and demand: Pure competition Monopolistic competition Oligopolistic competition Pure monopoly Economic factors: Recession, inflation, and interest rates affect pricing decision because they affect consumer spending, consumer perceptions of the product’s price and value, and the company’s costs of producing and selling a product. External factors: The company should set price that give resellers a fair profit, encourage their support and help them to sell the product effectively. The government is another important external influence on pricing decisions Social concerns may need to be taken into account. In setting prices, a company’s short-­‐term sales, market share, and profit goals may need to be tempered by broader societal consideration. ...
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