mymarketingprelim3[1] - ch13: building the price foundation...

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Unformatted text preview: ch13: building the price foundation coNATURE 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 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 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: involve specifying the role of price in an organizations marketing and strategic plans 1. PROFIT measure in terms of return on investment (ROI) or return on assets (ROA) objectives managing for long run profits: a company gives up immediate profit in exchange for achieving a higher market share by developing quality products to penetrate competitive markets over the long term maximizing current profit: such as for a quarter or year, is common in many firms bc the targets can be set and performance measured quickly...
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mymarketingprelim3[1] - ch13: building the price foundation...

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