6_Price_and_distribution_of_financial_services

Demand managing price changes 2 responding to

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Unformatted text preview: rket defence •Cost pressures •Curb demand Managing Price Changes 2 Responding to competitors’ price price cuts •Ignore decrease •Undercut •Deflect the cut Responding to competitors’ price increases •Respond in kind •Maintain but emphasize value •Ignore increase Setting the Price Range Cost based Demand based Competition based Costs Fixed costs Variable Variable costs Marginal cost Total cost Cost Based Pricing Mark-up Cost-plus Experience curve Demand-Based Pricing Demand-based pricing indicates that when demand is strong, price goes up and when it is weak, price goes down. Competition-Based Pricing • Structure of market • Perceived value of product in the market Pricing Tactics • Price structures give guidelines to sales representatives to help in negotiating a final price with the customer • Pricing tactics are the final steps used in arriving at a final price. A special adjustment is a variation on a price structure Price determination Questions I • ‘Accountants are always interested in profits margins; sales managers want low prices to help push sales; and marketing managers are interested in high prices to establish premium positions in the marketplace.’ To what extent do you agree with this statement in relation to the setting of prices? • The only reason that companies set low prices is that their products are undifferentiated. Discuss. Questions II • To what extent do you believe that the price promotion techniques of the fast-moving consumer goods and retail sect...
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