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Intro to Marketing_Herzenstein_Date_050310

Intro to Marketing_Herzenstein_Date_050310 - Look at...

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Pricing What is a price? - Not only money (time, effort) - Mechanism by which a firm captures value o Want to know how it is set These 3 are bad methods of pricing: Cost-driven pricing: - Also called cost-plus - Seems safe but look at example to see how price would be $7.5 but really need $9 - Too many assumptions—risky o If don’t meet target units sold then don’t make a profit Customer-driven pricing: - Problems: o Don’t know willingness to pay o Ignores cost and competition - Cost initially want to cover are your variable costs Competition- driven pricing: - Problems: o Market share does not equal profit o Ignores willingness to pay (product may deliver higher value) o Cost structure (economies of scale) o Target market (different segments) o Price war (undercutting competition) Good pricing techniques: - Optimal pricing requires information about: o Cost o Customers o Competitions o Legal environment (Constraints)
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Unformatted text preview: Look at ECON101 Supply & Demand graphs Price slides:-Curves meet at P* and Q* to maximize profits-Usually see a price floor in agriculture o Government has to take care of extra supply, if it doesn’t a black market will develop Econ 101 Costs:-Fixed Cost o Incremental : lighting in a classroom (have class or don’t have class) o Non incremental: fix the roof-Opportunity cost- cost of educations is not only tuition (also what you would make if working instead etc.)-Sunk cost- already incurred, cannot be recovered. Always IGNORE when price!-Variable/Marginal costs: directly related to quality Econ101 Break-even analysis:-What to do?—look at graphs on next slide o Get to point where gain= loss Q new= Q breakeven-Why useful? o Making same profit on each point on BE demand curve o Tells you what to do with your prices...
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Intro to Marketing_Herzenstein_Date_050310 - Look at...

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