Chapter 13 Building the Price Foundation

Chapter 13 Building the Price Foundation - Chapter 13...

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Chapter 13 Building the Price Foundation NATURE AND IMPORTANCE OF PRICE price- money or other considerations exchanged for the ownership or use of a good or service barter- practice of exchanging goods and services for other goods and services rather than money Final price= list price – (Incentives + Allowances) + Extra Fees 1) Price as and indicator of value i) From a consumers stand point price is often used to indicate value when it is compared with the perceived benefits ii) Value= Perceived benefits/price iii) Value pricing- the practice of simultaneously increasing product and service benefits while maintaining or decreasing price iv) 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 2) Price in the marketing mix i) Price affects the quantity sold ii) Price also indirectly affects cost since quantity sold sometimes affects a firms costs because of efficiency of production iii) 6 steps in setting the price (first 3) STEP 1: IDENTIFY PRICEING OBJECTIVES AND CONSTRAINTS 1) Identifying pricing objective i) Pricing objectives- specifying the role of price in an organization marketing and strategic plans (1) Objectives may change depending on the financial position of the company as a whole, the success of its products or the segments in which it is doing business b) Profit i) Often measured in terms of ROI or ROA ii) Managing for long run profit- a company gives up immediate profit in exchange for achieving a higher market share by developing quality products to penetrate competitive markets (1) Products are priced relatively low compared to their cost to develop iii) Maximizing current profit- common because the targets can be set and performance measure quickly iv) Another profit consideration is making sure that those firms in their channel distribution make adequate profits (movie studios)
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Chapter 13 Building the Price Foundation - Chapter 13...

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