what’s happening?
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What’s Happening?. http ://www.youtube.com/watch?feature=player_embedded&v=9mIBKifOOQQ. Pricing Strategies. Chapter 11. Price Defined. The amount of money charged for a product or service that consumers exchange for the benefits of having or using the product or service. - PowerPoint PPT PresentationTRANSCRIPT
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What’s Happening? http
://www.youtube.com/watch?feature=player_embedded&v=9mIBKifOOQQ
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Pricing Strategies
Chapter 11
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Price Defined The amount of money charged for a
product or service that consumers exchange for the benefits of having or using the product or service. Most flexible element in marketing mix Major impact on store/product/service
image
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What else is price? Value
Product powerto stimulateexchange
Barter Money-less
exchange
Other Terms: Rent Fee Donation Toll Honorariu
m Tuition
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Price as a Marketing Mix variable
Price Competition versus Nonprice Competition
John Deere uses nonprice competition by emphasizing quality and workmanship
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The Fundamentals of Pricing Strategy
1. Set pricing objectives2. Establish importance to target
market3. Understand demand4. Understand costs5. Determine strategy
$d
s TM₤
П
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Product objectives
Distribution objectives
Promotion objectives
Price objectives
Marketingobjectives
Companyobjectives
Actual prices
Pricingstrategiesandpolicies
Relating Pricing objectives to Marketing
objectives
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Price Elasticity of Demand
Inelastic demand: when a percentage change in price causes a much smaller percentage change in demand Products that have few, if any substitutes Consumption is necessary Pricing strategy is to raise prices to earn
more profits
Price elasticity: a measure of the sensitivity of demand to changes in price
Elastic demand: when a percentage change in price causes a much larger percentage change in demand Products that have many substitutes Consumption is discretionary Pricing strategy normally to lower price to sell
more
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Price Elasticity of Demand
Demand Curve
0
2
4
6
8
10
12
0 5 10 15 20 25 30 35 40
Quantity demanded
Pric
e
P2
P11
Q21
Q21
Q1 Q1
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Price Adjustments Cash Discounts Trade Discounts Quantity Discounts Seasonal Discounts Chain Discounts Promotional
AllowancesSeasonal discounts are a common marketing strategy to encourage purchases
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Pricing StrategiesDifferential Pricing strategies Variable pricing Segment pricing Skimming Periodic discounting Random discounting
Competitive Pricing strategies Meeting the competition Below the competition Price leadership Following the leader Penetration pricing
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Pricing StrategiesProduct-line
Pricing strategies
Captive pricing Leader pricing Bait pricing Price lining Price bundling Multiple-unit
pricing
Psychological and image Pricing strategies
Reference pricing Odd and even pricing Prestige pricing
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Marketing Math
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1.Markup on Selling Price:
= % markup on selling priceAmount added on
----------------------------Selling price
Establishing the Exact price
2. Markup on Cost:
= % markup on costAmount added on
----------------------------Cost
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Manufacturer
Cost $20.0020% markup$ 5.00Selling price$25.00
Wholesaler
Cost $25.0015% markup$ 4.41Selling price$29.41
Retailer
Cost $29.4141% markup$20.59Selling price$50.00
Markup through a channel of distribution