price planning sports & entertainment marketing mrs. wilson
Post on 28-Dec-2015
216 Views
Preview:
TRANSCRIPT
What we know…What we know… Price is value
You want to have a top market position
You have a “share” or percentage of the market
I want this share
of the pie!
Return on InvestmentReturn on Investment
Calculation used to determine the relative profitability of a product
Formula is: Profit divided by investment
____ _PROFIT______INVESTMENT
ProfitProfit
Another word for return Ergo the phrase… return on investment
Example: Your sports drink is $8 each Costs are $6.50 Formula:
$8 - $6.50 $6.50
1.256.50 .23
Market Factors Affecting Market Factors Affecting PricesPrices How do businesses make decisions?
Not an easy answer
Planning begins with an analysis of costs and expenses
Can these expenses change?
Passing the increase on to customers may seem easy, but is it?
List of Factors affecting Price
Consumer Perceptions
Supply/DemandCosts/Expenses
Government Regulations
Costs and Expenses
Businesses constantly monitor, analyze, and project prices and sales in the light of costs and expenses
Doing this helps to determine a firm’s profit
The Big Marketing Question…
What do marketers do when costs increase and sales decline?
How do they maintain their profit margin?
Do they change their prices?
Some answers…
Sure they make changes For example:
How about changing the “size” before they will change the price?
Candy bar size may decrease from 4 to 3.5 ounces
Therefore the cost of making the bar is reduced and profit remains the same
This ONLY works if the same quantity is sold
Other answers…
Manufacturers drop features their customers don’t value. In 1994, Reebok stripped down its best-
known athletic shoe, the $135 “Shaq Attaq”
Four versions replaced one Starting with the basic model priced at $60
ending with an option-packed shoe much like the original $130 version
Thus eliminating features, the company could compete more effectively based on price
Third approach….
Some manufacturers respond to higher costs and expenses by IMPROVING their products
Add more features Upgrade the materials Therefore justifying higher prices
Increase in higher cost is JUSTIFIED!
Goodyear Tire & Rubber Co.
Used this approach successfully Aquatred All-Season Radial Tire
Sold for 10% more than Goodyear’s previous premium-priced tire
Consumers “perceived” the improved tire as having more value because it was for “wet” roads
Lower Costs/Expenses
On occasion, prices may actually DROPDROP because of decreased costs and expenses
Improved technology and less expensive but better-quality materials may help create better-quality products at lower costs
For example…
Personal Computers… These have fallen in price because of the
improved technology of microprocessors They require LESS wiring and assembly
time Durability and memory has also improved
What is the Break-even Point? Companies ALWAYS want to make a
profit. Special concerns are when they
Market a new product Starbuck’s Chantico!
Try to establish a new price
Break-even Defined
A point at which sales and revenue EQUALS the costs and expenses of making and distributing a product.
After this point is reached, we are making PROFIT!!!!
Units of ProductionUnits of Production
Total RevenueTotal Revenue
Break-evenBreak-evenPointPointD
oll
ars
Do
llar
s
Total Total CostsCosts
LossesLosses
Look at this picture…
top related