S12 MKTG 3104 13, 14. Pricing Strategy Outline

S12 MKTG 3104 13, 14. Pricing Strategy Outline - MKTG 3104...

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MKTG 3104 Pricing Strategy
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CONTENT OBJECTIVES 1. Model price and its relationship to value 2. Identify the steps in price setting and the related issues and analysis Pricing objectives and constraints Demand and revenue curves Cost, volume, price, profit relationships Pricing strategies 3. Grasp the psychology of pricing and the role of reference prices PRICE Money or other considerations exchanged for the ownership or use of a good or service.
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+ - Price Captures value for the seller via profits Create value for the buyer Marketing Model of Price and Value Total OFFER VALUE = Perceived benefits Price Product VALUE Benefit Promotion Place Higher prices may also create benefits and value if: Buyers perceive a price-quality relationship (price signals quality) High price adds status or psychological benefits As the buyer’s reference price increases, so does the perceived value of the offer. Referenc e price +
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Steps in Setting Price (Chapter 13)
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Steps in Setting Price (Chapter 14)
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Step 1. Set Pricing Objectives 1. Price for Profit (Example: Target Profit Pricing, Target Return-on-Sales Pricing) Does this mean long term profit or current profit? Short term profit or target return objective  need to know cost/demand curves Long term horizon  need to consider the effect of price on market share, growth, and competitive advantage.
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2. Price to Increase Sales or Market Share (Examples: Penetration Pricing Bundle Pricing) Easily communicated targets Dollar sales/share important for obtaining market channel power and leverage with distribution channels. Unit sales/share important if you expect high volume to lower costs Step 1. Set Pricing Objectives
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Experience Curve Effect As cumulative volume doubles, unit cost decreases by a fixed percentage Why? Learning curve for production, marketing Process innovation Product redesign Implication? Maximize unit sales to lower costs  price low
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3. Price for Stability (Example: Price leader/Price Follower) •. powerful competitors want to avoid price competitor
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This note was uploaded on 02/29/2012 for the course MKGT 3104 taught by Professor Dr.klein during the Spring '12 term at Virginia Tech.

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S12 MKTG 3104 13, 14. Pricing Strategy Outline - MKTG 3104...

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