pricing - Click to edit Master subtitle style Pricing...

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Unformatted text preview: Click to edit Master subtitle style Pricing Strategies Consumers’ Economic Sacrifice 5 C’s of pricing  First Establish the range of “acceptable” prices  Customer —willingness to pay – sets the ceiling  Costs — sets the floor  price below costs?  Other Factors to Consider:  Competition —sets bar for what is “high” and low In the “real” world  What do you think the majority of companies focus on??  Market Survival End of season sales charge for services that were previously free This is a short-term objective  Profitability--optimal price a trade off between margins and number of sales to maximize profitability price skimming More Pricing Objectives  Sales / Market Share growth penetration pricing productivity effects  Competitive Impact price wars usually occur when little difference between products  Quality and Image prestige/premium pricing Let’s start with understanding  Types of Costs: Fixed Variable  TOTAL COST Effect of Price on Profits Break even analysis: TR = TC P*Q = FC + (VC*Q) Fixed costs  Breakeven Q = price-variable costs Common Cost Strategies  Mark-up Pricing 1) Calculate Unit Cost = VC + FC/Unit Sales 2) Determine the Mark-up you want to earn Price = unit cost {1 – return}  Target Return Pricing 1) Determine desired ROI 2) Calculate Unit Cost (as above) Price = Unit Cost + {return x investment} D A Discussion of Price Elasticity: Each price that the company charges will lead to different levels of demand CONSUMER FACTORS –Value Based Pricing Calculating Elasticity So what does this mean???...
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This note was uploaded on 10/16/2010 for the course B&E BADM 691 taught by Professor France during the Spring '10 term at WVU.

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pricing - Click to edit Master subtitle style Pricing...

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