ADM2320X summer 2008-ch 13

ADM2320X summer 2008-ch 13 - Pricing Strategy Please note:...

Info iconThis preview shows pages 1–12. Sign up to view the full content.

View Full Document Right Arrow Icon
1 Pricing Strategy Please note: These slides include subject matter not found in Ch. 13 of the textbook. Refer to Ch 13. for additional discussion on pricing.
Background image of page 1

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

View Full DocumentRight Arrow Icon
2 Price is the value that customers give up, or exchange, to obtain a desired product. Monetary payment in goods, services Tuition, professional fees, dues Non-monetary value Barter: exchange of good or service for another good or service of like value Operating costs associated with using a product Switching costs involved in moving to another product Opportunity costs when giving up something to obtain something
Background image of page 2
3 Other costs Convenience represents cost-savings in terms of savings in time and effort Psychological costs associated with Stress Hassle Cognitive difficulty and cognitive dissonance Unpleasant experiences/images (negative social marketing advertisements)
Background image of page 3

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

View Full DocumentRight Arrow Icon
4 Importance of pricing decisions Good pricing decisions are critical for success Price impacts the marketing mix Product strategies Distribution strategies Promotion strategies
Background image of page 4
5 Marketer’s view of costs Cost of goods sold has 2 components Fixed costs Do not vary with the number of units produced Rent, plant & equipment,utilities, overhead,salaried Variable costs Vary with the number of units produced Variable inputs to production Materials and labour
Background image of page 5

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

View Full DocumentRight Arrow Icon
6 Costs continued…. Price charged must cover variable costs or the firm loses money on each transaction Contribution margin is difference between the price charged and variable costs Total contribution is contribution margin for all units sold. Total contribution, less fixed costs, is net profit before tax. Total unit cost are variable costs plus average fixed costs per unit.
Background image of page 6
7 Break-even analysis Point at which firm does not lose any money and does not make any profit; all costs are covered. Total Revenue = Total Costs TR = TFC + TVC B-E (in units) = TFC/contrib. per unit to FC B-E (in $) = TFC/1-(VC per unit/price)
Background image of page 7

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

View Full DocumentRight Arrow Icon
8 Developing pricing objectives Profit Sales or market share Competitive effect Customer satisfaction Image enhancement (positioning) Flexibility of price
Background image of page 8
9 Developing pricing objectives Profit objectives : Maximize profits Achieve a target level of profit growth Achieve a desired net profit margin Premium pricing strategy increases profits Market share strategy increases sales & market share (price and profits fall) Profit goal is included in fixed costs when calculating B-E point
Background image of page 9

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

View Full DocumentRight Arrow Icon
10 Determining pricing objectives Sales or Market Share : Set price at a level to maximize sales or market share Usually a lower price is used to build sales and market share
Background image of page 10
11 Determining pricing objectives Competitive effect : Pre-emptive sales promotion
Background image of page 11

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

View Full DocumentRight Arrow Icon
Image of page 12
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 12/08/2009 for the course TEFLER ADM1300 taught by Professor Koppel during the Fall '09 term at University of Ottawa.

Page1 / 56

ADM2320X summer 2008-ch 13 - Pricing Strategy Please note:...

This preview shows document pages 1 - 12. Sign up to view the full document.

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