Class12 Pricing2

Class12 Pricing2 - Copyright 2009 Indiana University The...

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Unformatted text preview: Copyright 2009 Indiana University The Marketing Mix Pricing Part 2 M370 John Talbott Faculty Department of Marketing Fall 2010 Copyright 2009 Indiana University Copyright 2009 Indiana University Copyright 2009 Indiana University Fixed Costs? Rent Plant and Equipment Corporate Payroll Variable Costs? Payroll Materials Marketing Costs Variable Payroll costs are the driver of movement of production to developing countries. Costs plus profit requirements establish the floor for pricing. Target costing focuses on establishing the price then driving cost to achieve desired levels of profit. Elements of Costs Copyright 2009 Indiana University Copyright 2009 Indiana University Pricing Fundamentals Cost Based Markup( MU c ) =1.82 (MU$)/C Retail Based Markup (Mu r ) = 45% (MU$)/R Proposed Selling Price (Retail) Product Cost MU Dollars Copyright 2009 Indiana University Copyright 2009 Indiana University Pricing Formulas Price$ = MU$+C$ MU$ = Price$-C$ C$=Price$-MU$ MU R% =MU$/Price$ MU C% =MU$/Cost$ Copyright 2009 Indiana University Copyright 2009 Indiana University Pricing through the channel 32$ 8$ 40$ 40$ 80$ 85$ 165$ Copyright 2009 Indiana University Copyright 2009 Indiana University Have to price and achieve quantities at sufficient levels to attain profit targets. Target Profit Copyright 2009 Indiana University Copyright 2009 Indiana University Break Even Formulas Breakeven Unit Volume = Fixed Costs/(price-variable costs) BE Sales = Be...
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Class12 Pricing2 - Copyright 2009 Indiana University The...

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