Lesson8_2017 - LESSON 8 PRICING [email protected] 2 What is a price The amount of money charged for a product or service The sum of all the values that

Lesson8_2017 - LESSON 8 PRICING [email protected] 2 What is a...

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What is a price? The amount of money charged for a product or service The sum of all the values that consumers give up in order to gain the benefits of having or using a product or service [email protected] 2
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The only element in the marke9ng mix that produces revenue One of the most flexible marke9ng mix elements, can be changed quickly The number-one problem for many marke9ng managers The key strategic tool for crea9ng and capturing customer value [email protected] 3
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Factors to consider when setting prices [email protected] 4 Figure 10.1
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Value-Based pricing vs. cost-based pricing [email protected] 5 Figure 10.2
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Company and product cost Total Costs = fixed costs + total variable costs TC(Q) = FC + vc*Q Average (or Unit) Cost = Total costs/Unit sales UC = TC(Q)/Q Cost-based pricing: sets prices based on the costs and sells the product plus a fair rate of return for its effort and risk (specified as a markup) [email protected] 6 Fixed costs (overhead) Variable costs Total costs/Average cost
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Cost-Plus pricing Add a standard markup to the total cost Markup on cost vs. Markup on price (pp. A13 in Appendix II) Benefits More certain about costs, easier to manage
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