Nov 4 - Pricing Strategy, Part II

Nov 4 - Pricing Strategy, Part II - 100,000 $40,000 50,000...

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Pricing Strategy, Part 2 November 4, 2009 Instructor: Tamar Milne
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Agenda The 5 C’s of Pricing Competition Costs Channel members New product pricing For next class. .. 2
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III. Competition Level of competition often shapes pricing Monopoly Oligopoly Monopolistic competition Pure competition Decommoditize through differentiation 3
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IV. Costs Basing prices on costs is not value-oriented But cost structures affect profitability Break-even analysis: determines level of sales required at a given price to cover costs Break-even point: sales volume at which total revenue = total costs Consider fixed costs, variable costs, contribution margin 4
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Marketing Math Break-even point (units) = total FC CM $ Break-even point ($) = total FC 1-(VC/selling price) If targeted return is sought: Break-even point (units) = total FC + profit $ CM $ 5
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6 Example: Break-even Analysis Price Qty demanded Total Rev Total FC Total VC Total Cost B/E Point Total Profit $15 2,500 $37,500 $40,000 $12,500 $52,500 4,000 ($15,000) $10 10,000
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Unformatted text preview: 100,000 $40,000 50,000 90,000 8,000 10,000 $9 13,000 117,000 $40,000 65,000 105,000 10,000 12,000 $8 14,000 112,ooo $40,000 70,000 110,000 13,334 2,000 $7 15,000 105,000 $40,000 75,000 115,000 20,000 (10,000 V. Channel Members Channel members manufacturers, wholesalers, retailers can have different pricing priorities 7 New Product Pricing Skimming (a.k.a. market-plus pricing ): setting relatively high price May reduce price as competition intensifies Penetration pricing (a.k.a. market-minus pricing ): setting low price to attract new customers, market share Often used by new entrants to already competitive categories 8 For Next Class. .. Reading: Chapter 13: Marketing Channels SWOT Analysis due Friday Email PDF to me by 1:00 p.m. Hand in a hard copy in class NOTE: Opportunities are not strategies, but the external factors that would make those strategies attractive or feasible 9...
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Nov 4 - Pricing Strategy, Part II - 100,000 $40,000 50,000...

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