Chapter 13 - Chapter 13: Building the Price Foundation...

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Chapter 13: Building the Price Foundation Tuition – education Rent – apartment Interest – bank credit card Premium – car insurance Fee – dentist/ physician Dues – professional or social organization Fare – airlines What is Price? o The places where all other business decisions come together. o Price : the money or other considerations (including other products and services) exchanged for the ownership or use of a product or service. o Barter : the practice of exchanging products and services for other products and services rather than for money. o All the factors that increase or decrease the final price of an offering help construct a “price equation.” Ex: Tesla Roadster – Final price = [list price] – [(incentives) + (allowances)] + [extra fees] * final price is more than the list price Global marketplace: international firms look around the world to find both new markets to increase revenues and suppliers whose efficiencies and lower hourly wages can reduce the prices the buying firms pay. o IKEA: Swedish retailer; both opening new stores and contracting with furniture manufacturers around the world. – in China they slashed prices to appeal to consumers in the country’s growing middle class. Price often used to indicate value when it is compared with the perceived benefits such as: quality, durability, etc of a product or service. o [VALUE EQUATION] o Value : ratio of perceived benefits to price o Value pricing : the practice of simultaneously increasing product and service benefits while maintaining or decreasing price. For some products, price influences consumers’ perceptions of overall quality and ultimately its value to consumers. Profit equation : o Profit – Total revenue – Total cost o Price affects the quantity sold; since the quantity sold affects a firm’s costs because of efficiency of production, rice also indirectly affects costs. o Thus, pricing decisions influence both total revenues (sales) and total costs, which makes pricing one of the most important decisions marketing executives face. THE PROCESS ORGANIZATIONS GO THROUGH IN SETTING PRICES: 1. Identifying Pricing Objectives and Constraints: Pricing objectives involve specifying the role of price in an organization’s marketing and strategic plans; these pricing objectives are carried to lower levels in the organization, such as in setting objectives for marketing managers responsible for an individual brand.
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o Profit : often measured in return of investment (ROI) or return on assets (ROA). Managing for long-run profits
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This note was uploaded on 10/04/2011 for the course MKTG 3104 taught by Professor Ebcoupey during the Spring '08 term at Virginia Tech.

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Chapter 13 - Chapter 13: Building the Price Foundation...

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