PRICING_AND_CREDIT_CH10_EFF - Pricing and Credit Strategies...

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: Pricing and Credit Strategies Chapter 10 Pricing & Credit Chapter 10 Pricing & Credit Factors Affecting Price Product or service costs Market forces Competitors’ prices Sales volume Company’s image Customers expectations Economic conditions Chapter 10 Pricing & Credit Chapter 10 Pricing & Credit Seasonal fluctuations Customers’ price sensitivity Psychological factors Credit terms and purchase discounts Desired image What determines price? What Price Ceiling ("What will the market bear?") ? Acceptable Price Price Range Range ? ? Final Price ((Whatis the Final Price What is the company's desired "image?") company's desired "image?") ? ? ? ? ? ? ? ? ? Price Floor ("What are the company's costs?") Pricing: Dealing with Rapidly Rising Costs Communicate with your customers Focus on efficiency Consider absorbing cost increases Emphasize the value your company provides to customers Try to lock in prices with suppliers Chapter 10 Pricing & Credit Chapter 10 Pricing & Credit Two Pricing Forces: Image and Competition Price conveys image. Prices send signals to customers about quality and value Key is understanding your target customers When setting prices, business owners must consider competitors’ prices. Competitors’ locations Nature of the competing goods Chapter 10 Pricing & Credit Chapter 10 Pricing & Credit Introducing a New Product Three Goals: Get the product accepted Maintain market share as competition grows Earn a profit Chapter 10 Pricing & Credit Chapter 10 Pricing & Credit Introducing a New Product Three Strategies: Penetration Skimming Sliding down the demand curve Chapter 10 Pricing & Credit Chapter 10 Pricing & Credit Pricing Established Goods and Services Odd pricing Price lining Leader pricing Geographic pricing Zone pricing Uniform delivered pricing F.O.B seller Chapter 10 Pricing & Credit Chapter 10 Pricing & Credit Pricing Established Goods and Services Opportunistic pricing Discounts (or markdowns) Multiple pricing Bundling Optional product pricing Captive product pricing By­product pricing Chapter 10 Pricing & Credit Chapter 10 Pricing & Credit Pricing Established Goods and Services Suggested retail prices Follow­the­leader pricing Below­market pricing Adjustable (or dynamic) pricing Chapter 10 Pricing & Credit Chapter 10 Pricing & Credit The Pricing Strategy Balancing Act The Pricing Strategy Balancing Act Pricing for Retailers: Markup Dollar Markup = Retail Price ­ Cost of Merchandise Dollar Markup Percentage (of Retail Price) Markup = Retail Price Percentage (of Cost) Markup = Dollar Markup Cost of Unit Chapter 10 Pricing & Credit Chapter 10 Pricing & Credit Pricing for Retailers: Markup Dollar Markup = Retail Price ­ Cost of Merchandise Dollar Markup = Retail Price ­ Cost of Merchandise Dollar Markup Percentage (of Retail Price) Markup = Retail Price Percentage (of Cost) Markup = Dollar Markup Cost of Unit Example: Dollar Markup = $25 ­ $15 = $10 Percentage (of Retail Price) Markup = Percentage (of Cost) Markup = $10 $25 = 40% $10 = 67% $15 Pricing for Manufacturers: Breakeven Selling Price Total fixed Variable Breakeven { Variable cost Quantity } Breakeven Quantity costs Selling per Selling Profit + { per unit x produced } + costs = Price Price Quantity produced Chapter 10 Pricing & Credit Chapter 10 Pricing & Credit Pricing for Manufacturers: Breakeven Selling Price Total Variable Breakeven { Variable cost Quantity } fixed Breakeven Quantity Selling per Selling Profit + { per unit x produced } + costs costs = Price Price Quantity produced Example: Breakeven Breakeven Selling Selling = Price Price $0 + { 6.98/unit x 50,000 unit } + $110,000 $110,000 50,000 units = $9.18 per unit Chapter 10 Pricing & Credit Chapter 10 Pricing & Credit Pricing for Service Firms: Pricing for Service Firms: Price per Hour Price per Hour = Total cost per x 1 productive hour (1 ­ net profit target as a % of sales) Pricing for Service Firms: Price per Hour Price per Hour = Total cost per x 1 productive hour (1 ­ net profit target as a % of sales) Example: Jerry’s TV Repair Shop Price per Hour = $13.44 per x 1 hour (1 ­.18) = $16.38 per hour Consumer Credit More than 80% of U.S. households have credit cards Average U.S. household has 17 credit cards! Customers make 30% of personal consumption expenditures with either credit or debit cards. Chapter 10 Pricing & Credit Chapter 10 Pricing & Credit Credit and Pricing Merchants incur fees to be able to accept credit cards. Application fee Transaction fees Interchange fees Equipment fee Licensing fee Holdbacks and chargebacks Chapter 10 Pricing & Credit Chapter 10 Pricing & Credit ...
View Full Document

This note was uploaded on 01/11/2012 for the course MANAGEMENT MGT4914 taught by Professor Duweane during the Spring '11 term at Assumption College.

Ask a homework question - tutors are online