Chapter 19 - Day 29 - Student

Chapter 19 - Day 29 - Student - CHAPTER 19 Pricing Concepts

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Unformatted text preview: CHAPTER 19 Pricing Concepts iStockphoto.com/ktsimage LO 1 Discuss the importance of pricing decisions to the economy and to the individual firm LO 2 List and explain a variety of pricing objectives LO 3 Explain the role of demand in price determination Learning Outcomes LO 4 Understand the concept of yield management systems LO 5 Describe cost-oriented pricing strategies LO 6 Demonstrate how the product life cycle, competition, distribution and promotion strategies, customer demands, the Internet and extranets, and perceptions of quality can affect price Learning Outcomes The Importance of Price Price allocates resources in a free-market economy To the consumer... Price is the cost of something To the seller... Price is revenue Marketing has the broadest perspective on pricing because it is the function that looks at both internal cost issues and external pressure demands. What Is Price? Price is that which is given up in an exchange to acquire a good or service. Price What is Price? Sacrifice Effect of Price What is sacrificed to get a good or service Money, Time, Dignity Information Effect of Price Infers quality information based on price Higher quality = higher price Convey status Value Based upon Perceived Satisfaction Reasonable Price = Perceived Reasonable Value Exchange based on expectation of satisfaction The Importance of Price to Marketing Managers Revenue The price charged to customers multiplied by the number of units sold. Profit Revenue minus expenses. Profit drives growth, salary increases, and corporate investment Prices are the key to revenues The price must not be too high or too low, and must equal a perceived value to consumers Cost-Based Pricing Price based on current costs, projected short-term share gains or current competitors prices Product -> Cos t -> Price -> Value -> Cus tomer Value-Based Pricing Understand the attributes customers want in the goods and services they buy and the value of that bundle of attributes to customers. Cus tomers -> Value -> Price -> Cos t -> Product Subways $5 Footlong: http://www.businessweek.com/magazine/content/09_46/b4155058815908.htm Trends Influencing Price Flood of new products Increased availability of bargain-priced private and generic brands Price cutting as a strategy to maintain or regain market share Internet used for comparison shopping U.S. recession from late 2007 to 2009. Pricing Objectives Categories P ro f it-O r ien ted S a les-O r ien ted S ta tu s Q uo Profit Maximization Satisfactory Profits Target Return on Investment Market Share Sales Maximization Maintain Existing Prices Meet Competition Prices Profit-Oriented Pricing Objectives P ro f it-O r ien ted P r ic in g O b jec t ives Profit Maximization Satisfactory Profits Target Return on Investment Pricing Objectives:...
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This note was uploaded on 02/12/2012 for the course SCM 301 taught by Professor Montabon during the Spring '11 term at Iowa State.

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Chapter 19 - Day 29 - Student - CHAPTER 19 Pricing Concepts

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