MRKTNG 3000 1nd Edition Lecture 12Outline of Last LectureI. Distributiona. Coverage strategies b. RetailingOutline of Current LectureII. Pricinga. Objectives b. Pricing strategy for new products c. Strategy for existing productsd. Pricing methods Current LecturePricing policy:Select pricing objective determine demand estimate cost analyze competitors select pricing method select final pricePricing existing and new products: objectives:-Segmentation and positioning-Signal of product quality-Profit goals-Market share goals-Social responsibility -Price should reflect goals and target market-Price is a signal for quality (economic signaling theory)Pricing strategy- new products:Penetration pricing- set price low, immediate market shareThese notes represent a detailed interpretation of the professor’s lecture. GradeBuddy is best used as a supplement to your own notes, not as a substitute.Price skimming- set price high, quick/large profitsConditions favoring new product pricing strategies:Penetration:Price elasticity- highStandards issue- presentTechnological change- LowEntry barriers- LowSkimming:PE- LowSI- AbsentTC- HighEB- High Pricing strategy- existing products:Perishability/ distinctiveness/ nature of competition based on product characteristics Pricing methods:-Mark-up pricing: unit variable cost+ fixed costs/unit sales= unit cost Markup pricing calculation (based on the selling price): unit cost desired return on sales= markup price -Perceived value pricing-Going rate (competitive) pricing Break even analysis:Break even point- that quantity of output at which total revenue equals total costs, assuming a certain selling price -Equals total fixed costs/price-unit variable costs Promotional pricing:-Loss-leader -Special-event-Cash rebates-Low-interest financing-Longer payment terms-Warranties and service contracts-Psychological discounting) deceptive reference prices)Discriminatory pricing to consumers:-Legal as long as it doesn’t hinder competition-Price discrimination: Texas Pharmaceuticals Top 5 drugs- 131% higher-Synthroid- 1597% higher-Should it be legal?For it to work:-Market must be segmentable-No selling across segments-Servicing segments cannot be greater that profits gained-Must not breed resentment or ill will -Must be