Pricing - Pricing Related to Chapter 12 1 Agenda Pricing...

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1 Pricing Related to Chapter 12
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2 Agenda: Pricing Factors affecting price decisions Pricing strategies and tactics
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3 Microsoft Xbox Retail Price: $179 - 199 On November 15, 2001 Microsoft introduced Xbox In May 2002 Microsoft dropped Xbox price by $100, from $299 to $199
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4 Importance of Price Price determines the demand and supply of products in the economy system Price is the only marketing mix element that produces revenue and profit Price as a product differentiation and a positioning tool
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5 Price and Value Price is the amount of money needed to acquire a product or service Buyers: cost Sellers: income Value is the ratio of perceived benefits to price price benefit perceived Value =
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6 Types of Price Base price (= list price) the price of one unit of the product or service, before discounts Selling price the price at which a product is sold Selling price = Base price - Discounts
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7 The six steps in setting price
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8 Steps in Price Planning 1. Develop pricing objectives 2. Evaluate factors affecting price decisions 3. Determine base price 4. Develop pricing tactics
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9 Pricing Goals Profit Maximization Market Share Leadership Survival
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10 Evaluating factors affecting pricing decisions Pricing decisions Pricing goals Costs Marketing mix Internal factors Market demand Competition Environmental factors External factors
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11 Costs Fixed Cost (FC) a cost that does not vary with sales or production levels EX: rents, administrative salaries Variable Cost (VC) a cost that is directly related to production volume EX: parts, labor Total Cost (TC) the sum of total fixed cost and total variable cost
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12 Costs, Revenue and Profit Revenue Price x Unit sales Profit Revenue - Cost
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13 The influence of costs on price decisions Prices are often based on costs EX: Cost-Plus pricing For many products, price is not directly related to costs
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14 Marketing mix strategy Target customers /Positioning strategy Banana Republic: Female jeans $60 Gap Original : Female jeans $48 Old Navy : Female jeans $28 Other marketing mix elements (Product, Distribution, Promotion) Product: Product life cycle, product quality and benefits Distribution: Types of distribution outlets Promotions: Sales promotion
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15 Evaluating factors affecting pricing decisions Pricing decisions Pricing Goal Costs Marketing mix Internal factors Market demand Competition Environmental factors External factors
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16 Demand Price and demand are inversely related
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Pricing - Pricing Related to Chapter 12 1 Agenda Pricing...

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