Chapter 21 Setting Prices 1 Importance of price depends on Type of product Type of target market Purchase situation Combines product s price and quality attributes A dollar amount to the cost of the product Adding a specified dollar amount to the seller s costs Adding to the price of the product a predetermined 2 Value focus 3 Cost based Pricing 4 Cost plus Pricing 5 Markup percentage of that price 6 Markup as of Cost 7 Markup as of Selling Price 8 Profit Maximization Markup Cost Markup Selling Price Notice that the maximum profit occurs when the slope of the total revenue curve is the same as the slope of the total cost curve Slope of total revenue marginal revenue Slope of total cost marginal cost Profit is maximum when marginal revenue equals marginal cost 9 Negotiated Final price established through buyer seller bargaining 10 Secondary market One price for primary target market and different price for another off peak times or different geographic area 11 Periodic discounting Systematic temporary price reduction 12 Random discounting Unsystematic temporary price reduction 13 Steps in Developing New Product Pricing Develop Marketing Strategy Make Marketing Mix Decisions Estimate Demand Curve Calculate Cost Understand Environmental Factors Set Pricing Objectives Determine Pricing Charging the highest possible price that buyers who most 14 Price Skimming desire the product will pay 15 Penetration Pricing Prices set below competing brands to penetrate market and gain market share quickly Basic product in a product line is low while related items are Pricing highest quality product higher than other models Low pricing on one item in line with intention of selling higher priced item in the line also called a loss leader Advertise low price but don t have adequate inventory try to 19 Bait and switch illegal sell more expensive item 20 Reference Pricing 21 Bundled Pricing 22 Multiple unit Pricing at a single price 23 Everyday low prices EDLP Moderate pricing positioned next to a more expensive brand Packaging multiple products to be sold at a single price meal consists of burger fries and drink Packaging together two or more identical products to be sold Pricing products low on a consistent basis 16 Captive higher 17 Premium 18 Bait
View Full Document
Unlocking...