Unit 8 Unit 8 Price and Value Price and Value 1 - PowerPoint PPT Presentation

Unit 8 Unit 8 Price and Value Price and Value 1 CuuDuongThanCong.com https://fb.com/tailieudientucntt

R R Road Map: Previewing the Concepts Road Map: Previewing the Concepts d M d M P P i i i i th th C C t t  Identify and explain the external and internal factors affecting  Id  Identify and explain the external and internal factors affecting  Id tif tif d d l i l i th th t t l l d i t d i t l f l f t t ff ff ti ti a firm's pricing decisions. a firm's pricing decisions.  Contrast the three general approaches to setting prices.  Contrast the three general approaches to setting prices.  Describe the major strategies for pricing imitative and new  Describe the major strategies for pricing imitative and new products. products.  Explain how companies find a set of prices that maximizes the  Explain how companies find a set of prices that maximizes the  Explain how companies find a set of prices that maximizes the  Explain how companies find a set of prices that maximizes the profits from the total product mix. profits from the total product mix.  Discuss how companies adjust their prices to take into account  Discuss how companies adjust their prices to take into account diff different types of customers and situations. different types of customers and situations. diff t t t t f f t t d d it it ti ti  Discuss the key issues related to initiating and responding to  Discuss the key issues related to initiating and responding to price changes. price changes. 2 CuuDuongThanCong.com https://fb.com/tailieudientucntt

We will begin learning about We will begin learning about pricing strategy by discussing beer! pricing strategy by discussing beer! i i i i t t t t b b di di i i b b ! ! QuickTime™ and a QuickTime and a QuickTime™ and a QuickTime and a TIFF (Uncompressed) decompressor TIFF (Uncompressed) decompressor are needed to see this picture. are needed to see this picture. 3 CuuDuongThanCong.com https://fb.com/tailieudientucntt

Factors Affecting Price Factors Affecting Price Factors Affecting Price Factors Affecting Price Decisions Decisions 4 CuuDuongThanCong.com https://fb.com/tailieudientucntt

Internal Factors Affecting Pricing Internal Factors Affecting Pricing Decisions: Marketing Objectives Decisions: Marketing Objectives Survival Low Prices Hoping to Increase Demand. Current Profit Maximization Choose the Price that Produces the Marketing g Maximum Current Profit, Etc. , Objectives Market Share Leadership Low as Possible Prices to Become the Market Share Leader the Market Share Leader. Product Quality Leadership High Prices to Cover Higher High Prices to Cover Higher Performance Quality and R&D. 5 CuuDuongThanCong.com https://fb.com/tailieudientucntt

Four Seasons Hotel Four Seasons Hotel Four Seasons Hotel Four Seasons Hotel  Four Seasons uses the product quality leadership strategy leadership strategy.  It starts with very high quality service, then quality service, then charges a price to match.  http://www.fourseasons. com 6 CuuDuongThanCong.com https://fb.com/tailieudientucntt

Internal Factors Affecting Pricing Internal Factors Affecting Pricing Decisions: Marketing Mix Strategy Decisions: Marketing Mix Strategy D D i i i i M M k ti k ti Mi Mi St St t t Product Design Nonprice Price Distribution Positions Positions P Promotion ti 7 CuuDuongThanCong.com https://fb.com/tailieudientucntt

Types of Cost Factors that Types of Cost Factors that Affect Pricing Decisions Affect Pricing Decisions Fixed Costs Variable Costs (Overhead) Costs that do vary Costs that don’t di directly with the tl ith th vary with sales or level of production production levels Raw materials Executive Salaries, Rent Total Costs Total Costs Sum of the Fixed and Variable Costs for Any Given Sum of the Fixed and Variable Costs for Any Given Level of Production Level of Production Level of Production Level of Production 8 CuuDuongThanCong.com https://fb.com/tailieudientucntt

External Factors Affecting External Factors Affecting Pricing Decisions Pricing Decisions Market and Demand Competitors’ Costs, Prices and Offers Prices, and Offers Other External Factors Economic Conditions Reseller Reactions Government Actions S Social Concerns i l C 9 CuuDuongThanCong.com https://fb.com/tailieudientucntt

Market and Demand Factors Market and Demand Factors Affecting Pricing Decisions Affecting Pricing Decisions Pricing in Different Types of Markets Pure Competition Pure Competition Pure Competition Pure Competition Pure Monopoly Pure Monopoly Pure Monopoly Pure Monopoly Many Buyers and Sellers Many Buyers and Sellers Single Seller Single Seller Who Have Little Who Have Little Effect on the Price Effect on the Price Eff Eff t t th th P i P i Oligopolistic Oligopolistic Oligopolistic Oligopolistic Monopolistic Monopolistic Monopolistic Monopolistic Competition Competition Competition Competition Competition Competition Competition Competition Competition Competition Competition C Competition C C C titi titi titi titi Few Sellers Who Are Few Sellers Who Are Many Buyers and Sellers Many Buyers and Sellers Sensitive to Each Other’s Sensitive to Each Other’s Who Trade Over a Who Trade Over a Pricing/ Marketing Pricing/ Marketing Pricing/ Marketing Pricing/ Marketing Range of Prices Range of Prices Range of Prices Range of Prices Strategies Strategies 10 CuuDuongThanCong.com https://fb.com/tailieudientucntt

Price Elasticity of Demand Price Elasticity of Demand A. Inelastic Demand - Demand Hardly Changes With ce a Small Change in Price. g Pric P P 2 P 1 Q 2 Q 1 Quantity Demanded per Period B. Elastic Demand - Demand Changes Greatly With Price a Small Change in Price. P’ 2 P’ 1 P 1 Q 2 Q 1 Quantity Demanded per Period Quantity Demanded per Period 11 CuuDuongThanCong.com https://fb.com/tailieudientucntt

Major Considerations in Major Considerations in Major Considerations in Major Considerations in Setting Price Setting Price 12 CuuDuongThanCong.com https://fb.com/tailieudientucntt

Cost-Based Pricing Cost-Based Pricing g Certainty About C Costs t Simplest Cost-Plus Pricing g Factors Factors Pricing is an Pricing is Method Situational Simplified Approach That Unexpected Adds a Adds a Standard Price Competition Markup to the Ignores Attitudes Is Minimised Cost of the Cost of the of of Current Current Others Product Demand & Competition Fairer to Buyers & Sellers 13 CuuDuongThanCong.com https://fb.com/tailieudientucntt

Breakeven Analysis or Target Breakeven Analysis or Target Profit Pricing Profit Pricing Tries to Determine the Price at Which a Firm Will Break Even or Make a Certain Target Profit. Total Revenue 12 llions) 10 Target Profit ($2 million) 8 8 Dollars (mil Total Cost 6 4 Fixed Cost 2 2 Cost in D 200 400 600 800 1,000 Sales Volume in Units (thousands) Sales Volume in Units (thousands) 14 CuuDuongThanCong.com https://fb.com/tailieudientucntt

Cost-Based Versus Value- Cost-Based Versus Value- Cost Based Versus Value Cost Based Versus Value Based Pricing Based Pricing 15 CuuDuongThanCong.com https://fb.com/tailieudientucntt

 After examining the previous slide,  After examining the previous slide, compare and contrast cost-based compare and contrast cost-based p p pricing and value-based pricing. pricing and value-based pricing.  What are situations that favor each  What are situations that favor each  What are situations that favor each  What are situations that favor each pricing method? pricing method? 16 CuuDuongThanCong.com https://fb.com/tailieudientucntt

Competition-Based Pricing Competition-Based Pricing p p g g Methods for Setting Prices Going-Rate Company Sets Prices Based on What Company Sets Prices Based on What Competitors Are Charging Sealed-Bid ? ? Company Sets Prices Based on ? What They Think Competitors Will Charge Will Charge 17 CuuDuongThanCong.com https://fb.com/tailieudientucntt

New-Product Pricing New-Product Pricing Strategies Strategies  Use Under These  Use Under These Conditions: Conditions: Market-Skimming  Product s Quality and Image  Product’s Quality and Image  Product’s Quality and Image  Product s Quality and Image  Setting a High Price for a Must Support Its Higher Price. Must Support Its Higher Price. New Product to “Skim”  Costs Can’t be so High that  Costs Can’t be so High that Maximum Revenues from the They Cancel the Advantage of They Cancel the Advantage of They Cancel the Advantage of They Cancel the Advantage of T Target Market. t M k t Charging More. Charging More.  Results in Fewer, But More  Competitors Shouldn’t be Able  Competitors Shouldn’t be Able Profitable Sales. to Enter Market Easily and to Enter Market Easily and to Enter Market Easily and to Enter Market Easily and  I.e. Intel, Sony Playstation, Undercut the High Price. Undercut the High Price. New Televisions 18 CuuDuongThanCong.com https://fb.com/tailieudientucntt