Chapter_17_-_Price_Theory

Chapter_17_-_Price_Theory - Study Guide for Marketing 431...

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Study Guide for Marketing 431 Summer 2009 Chapter 17 – Price Theory What is Price The element of the marketing mix that determines how much money you make Too low… give money away Too high… drive customers away Textbook: That which is given up in an exchange to acquire a good or service. Barter: Exchanging goods and services for other goods and services rather than for money. A major factor in determining value Value= f(perceived benefits, Perceived cost) Increase value by increasing benefits or decreasing cost Most consumers do not fully consider the non-financial costs Transaction costs Opportunity costs Price/value heuristic As a rule of thumb, we expect the more expensive item to be “better” Positioning Relative pricing is a signal to the market place Study Guide for Chapter 17 – Price Theory Page 1 Marketing 431, Summer 2009 © 2009
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Inverse demand curve for luxury products So what should the price be? It’s not that simple Depends on Organizational objectives Demand Costs A lot of other stuff (more on this later) Objectives and constraints Objectives Profit Long-term Short term Target return Publicly traded companies Assuming profits enough to stay in business… Market share Unit volume Survival Study Guide for Chapter 17 – Price Theory Page 2 Marketing 431, Summer 2009 © 2009
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Social Responsibility Constraints Issues that affect the price you can charge Demand Higher demand=higher price Stage in the product life cycle Introductory Growth Maturity Decline Product issues Single product vs product line What is the effect on other products Cost Long run cover all costs Short run cover variable costs Ability to change prices
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Chapter_17_-_Price_Theory - Study Guide for Marketing 431...

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