Price - University of Southern California Marshall School...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
University of Southern California Marshall School of Business BUAD 307 Lars Perner, Ph.D., Instructor Marketing Fundamentals Fall, 2007 SUMMARY OF CLASSROOM MATERIAL PRICE INTRODUCTION Background. Pricing decisions are extremely important for the firm. Some of the reasons: Pricing is the only part of the marketing mix which brings in revenue. Once a price has been set, consumers will often show a great deal of resistance to any attempts to change it. Pricing frequently has important implications for the positioning of a product. Price is the marketing mix variable for which a competitive response can be most quickly implemented. Conceptualizing price . A logical examination suggests that price should be defined as That is, we need to consider the quantity you receive as well as the amount of money you have to fork out. To say that gasoline costs $1.29 is meaningless outside the context that this cost is per gallon. WAYS TO CHANGE PRICE The above conceptualization suggests that the marketer has several ways available to change price: Increasing or decreasing the "sticker price" of a product . received goods up given resources = price
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Increasing or decreasing the quantity of material received . As prices of chocolate increased in the 1970s, firms found it difficult to raise candy bar prices. Instead, they simply made them smaller. Changing the quality of a product . Firms may cut back on services or dilute products more, possibly reducing or cutting out expensive ingredients. Change the terms of a sale . Firms may begin charging for previously free delivery. In recent years, many software manufacturers have stopped providing free telephone support for their programs. PRICING STRATEGIES Pricing strategies can be categorized based on several different variables. One variable of interest relates to the consistency of the prices. Some retailers today attempt to follow a strategy of "everyday low pricing." Although few firms tend to practice this method with perfect consistency, certain retailers like Wal-Mart tend to focus on providing constant low prices without any real sales. Other retailers instead feature prices which, when not discounted, are somewhat higher. To compensate, periodic sales feature price reductions. Sales can be implemented either with a predictable pattern (e.g., a product is put on sale every fourth week) or in a random manner (e.g., in any given week, there is a 25% chance that the product will offered on sale). (See chart on overheads). Note that "high-low" and "everyday low price" strategies are intended to take advantage of different price elasticities across people. Some consumers are price sensitive and will tend to buy only during sales; other people, in contrast, will buy all the time. Thus, people who are not willing to switch brands will have to pay full price for your products when they are not on sale; while they are on sale, a large number of "switchers" are attracted and sales volumes are increased. Other dimensions of interest in pricing involve the price introductory strategy.
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 09/22/2008 for the course BUAD 307 taught by Professor Morristowns during the Spring '07 term at USC.

Page1 / 8

Price - University of Southern California Marshall School...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online