12.Pricing

12.Pricing - Pricing The Marketing Strategy Process Context...

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Pricing
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Customers Company Competitors Target Market Selection Positioning Market Segmentation Product Place Promotion Price Customer Retention Customer Acquisition Profts The Marketing Mix Context The Marketing Strategy Process
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So, what is price? The money paid for the product The money received for the product rent, fee, fare, tuition allowance, etc. To the seller: To the buyer: Other terms for price:
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Why is price important? One determinant of buyer choice Especially when product differentiation is slight Only way to compare non-comparables new boat versus new TV Competition based on price is common If the wrong price causes the product to fail, there may be no second chance Impact on proFt
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The Impact of Price on ProFt = (Price x Quantity) - (±ixed cost + Variable cost x Quantity) Price ProFt Equation ProFt = Total revenue - Total cost Direct impact on proft ProFt Indirect impact on proft through quantity
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Fixed Costs Those costs that do not vary with output. Programmed costs result from attempts to generate sales volume: Advertising Sales salaries Committed costs are required to maintain the organization: Rent Administration Clerical salaries Total Cost Output in Units Fixed Costs
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Variable Costs Those costs that vary with output level. Total Cost Variable Costs Cost of goods sold : For manufacturer--materials, labor For wholesaler/retailer--merchandise Expenses : Sales commissions Discounts Delivery Output in Units
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Fixed and Variable Costs Total Cost Total Cost Output in Units Variable Cost Fixed Cost Total cost = Fixed cost + Variable cost
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Unit Margin Unit Margin = Price - Unit Variable Cost a.k.a. Unit Contribution Often expressed as percentage > Could be expressed as a percentage of cost > Usually expressed as a percentage of selling price Percent Margin = Unit Margin Price
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Contribution Analysis Unit Contribution = Price - Unit Variable Cost a.k.a. Unit Margin
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This note was uploaded on 11/17/2011 for the course BUS M 241 taught by Professor Swenson,j during the Fall '11 term at BYU.

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12.Pricing - Pricing The Marketing Strategy Process Context...

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