pricing fall 2006. a customer might ask, “what does that cost?” to the customer, what are costs?
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![Page 1: Pricing Fall 2006. A customer might ask, “What does that cost?” To the customer, what are costs?](https://reader030.vdocument.in/reader030/viewer/2022032704/56649d785503460f94a5a28d/html5/thumbnails/1.jpg)
Pricing
Fall 2006
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A customer might ask, “What does that cost?”
To the customer, what are costs?
![Page 3: Pricing Fall 2006. A customer might ask, “What does that cost?” To the customer, what are costs?](https://reader030.vdocument.in/reader030/viewer/2022032704/56649d785503460f94a5a28d/html5/thumbnails/3.jpg)
Pricing Products Price is the amount of money charged
for a product. This is not the same as the COSTS of product acquisition.
1995 FERRARI 355 $95,000.00
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Pricing Terms Fixed Costs Variable Costs Price Elasticity: sensitivity of demand to
changes in price Quantity Demanded/ Price
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Break Even Point
Knothole Skiers Costs:
– $25,000 rent for studio– $2 materials for manufacture of CD– $.50 royalty to artists
$ 5 price
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Internal Factors Affecting Pricing
Marketing Objectives– profits– market share– survival– middleman loyalty– discourage competitors– product-line consistency– visibility for product
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Internal Factors Affecting Pricing
Costs– Production and efficient use of capacity– Experience curve– Variable Costs
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External Factors Affecting Pricing Competition Demand Economy Government Societal Concerns
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Setting Price
Cost Based Competition Based Demand/Value Based
$40,137.00
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Pricing Strategies: The Familiar
Market-Skimming Pricing Market-Penetration Pricing
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Pricing Strategies: The Familiar Product Line Pricing
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Pricing Strategy
Sells: 100,000 units Price: $10 Fixed Costs: $500,000 for a capacity of
200,000 Units Variable Costs: $1 Request to sell in a new market. What
is the minimum selling price the firm should accept?
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Second Market Discounting
Sells: 100,000 units Price: $10 Fixed Costs: $500,000 for a capacity of
200,000 Units Variable Costs: $1 Request to sell in a new market. What
is the minimum selling price the firm should accept?
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Pricing Strategy
Average Economic Costs (all costs plus profit)– $55 at 20 Units– $40 at 40 Units
40 Consumers per period are interested in product. 20 want it at beginning of period and willing to pay
$50. 20 are price sensitive and will pay no more than $30
per unit. At which price should the firm sell its product?
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Periodic/Seasonal Discounting
Average Economic Costs (all costs plus profit)– $55 at 20 Units– $40 at 40 Units
40 Consumers per period are interested in product. 20 want it at beginning of period and willing to pay
$50. 20 are price sensitive and will pay no more than $30
per unit. At which price should the firm sell its product?
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Pricing Strategy
Distribute two films: Halloween XVI (a) and Chucky’s In Love (b). Albany (x) and Corvallis (y) theatres are interested. Discrimination is illegal as is tying.
Corvallis will pay $25K for (a) and $10K for (b)
Albany will pay $12K for (a) and $18K for (b). What pricing strategy do you use?
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Price Bundling
Distribute two films: Halloween XVI (a) and Chucky’s In Love (b). Albany (x) and Corvallis (y) theatres are interested. Discrimination is illegal as is tying.
Corvallis will pay $25K for (a) and $10K for (b)
Albany will pay $12K for (a) and $18K for (b). What pricing strategy do you use?
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Pricing Strategy
Produce computer printers. Ave. Economic Cost is $100 with a life of 3 years. During that time, product uses ink cartridges for which AEC is .50 per month. Consumers willing to pay $50 for printer and $2 per month for supplies. What pricing?
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Captive Product Pricing
Produce computer printers. Ave. Economic Cost is $100 with a life of 3 years. During that time, product uses ink cartridges for which AEC is .50 per month. Consumers willing to pay $50 for printer and $2 per month for supplies. What pricing?
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Other Pricing Issues
Segmented Pricing: different customers pay different prices
Psychological Pricing
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Other Pricing Issues
Price cuts and price increases: jnd Channel members
– Bad: price fixing (collusion), predatory pricing, price discrimination, resale price maintenance, deceptive pricing