Documenti di Didattica
Documenti di Professioni
Documenti di Cultura
Value-Pricing
- Engaged by creative marketers, simultaneously increasing
product and service benefits while maintaining or decreasing
price.
Step 2
Demand curves for Newsweek showing the effect on annual sales (quantity demanded per
year) by a change in price caused by (A) a movement along and (B) a shift of the demand
curve
Demand Factors:
1. Consumer Tastes
- These depend on may factors such as demographics, culture,
and technology.
2. Price and availability of similar products
- A point to remember, as price of substitutes falls on their
availability increases, the demand for a product will fall.
3. Consumer Income
- In general, as real consumer income (allowing for inflation)
increases, demand for a product also increases.
Fundamental
Concepts about
revenues, which
are the monies
received from
selling the
product: Total
revenue, average
revenue, and
marginal revenue.
How Newsweeks
downward-sloping
demand curve affects
total, average, and
marginal revenues.
Break-Even Analysis
This is a technique that analyzes the relationship between total
revenue and total cost to determine profitability at various levels
of output.
Break-even point (BEP) is the quantity at which total revenue
and total cost are equal.
Fixed Cost
FC
Price - UVC
Fixed Cost
FC
: $28,000
BEPQuantity = ----------------------------------- = ----------Unit Variable Cost : $30
Unit price Unit variable cost
Price UVC
$28,000
-----------------$100 - $30
= 400 pictures
Step 4
SELECT AN APPROXIMATE
PRICE LEVEL
Demand-Oriented Approaches
Demand-oriented
approaches
weigh
factors
underlying
1. SKIMMING
A firm introducing a new or innovative product can use
skimming pricing, setting the highest initial price that customers
really desiring the product are willing to pay.
Skimming pricing is an effective strategy when:
2. Enough prospective customers are willing to buy the product
immediately at the high initial price to make these sales profitable.
3. The high initial price will not attract competitors
4. Lowering price has only a minor effect on increasing the sales volume
and reducing the unit costs
5. Customers interpret the high price as signifying high quality
2. PENETRATION PRICING
Setting a low initial price on a new product to appeal
immediately to the mass market.
Example:
Nintendo consciously chose a penetration strategy when it
introduced Nintendo DS, its newest generation handheld video
game player to compete with Sonys PSP handheld player, which
used a skimming pricing strategy.
3. PRESTIGE PRICING
- Involves setting a high price so that quality- or statusconscious consumers will be attracted to the product and buy it.
4. PRICE LINING
- Often a firm that is selling not just a single product but a line
of products may price them at a number of different specific
pricing points.
Example,
department
store
5. ODD-EVEN PRICING
- Involves setting prices a few dollars or cents under a
rounded priced at something over US$900 rather than about
US$1,000.
Example:
Carrefour Singapore offers an Asus notebook for US$999, Sony
markets its VAIO notebook for US$4,999, and Cold Storage
Singapore prices its semillion Sauringon Blanc at US$19.90.
6. TARGET PRICING
- Manufacturers deliberately adjusting the composition and
features of a product to achieve the target price to consumers.
7. BUNDLE PRICING
- The marketing of two or more products in a single package
price.
Example: Cathay Pacific Airlines Dragon Holidays offers
vacation packages that include airfare, car rental, and lodging.
Cost-Oriented Approaches
With cost-oriented approaches a price setter stresses the cost
side of the pricing problem, not the demand side. Price is set by
looking at the production and marketing costs and then adding
enough to cover direct expenses, overhead, and profit.
Approaches are standard markup, cost-plus, and experience
curve.
2. COST-PLUS PRICING
- Involves summing the total unit cost of providing a product or
service and adding a specific amount to the cost to arrive at a
price.
Two Forms:
3. Cost-plus percentage-of-cost pricing
4. Cost-plus fixed-fee pricing
Profit-Oriented Approaches
A price setter may choose to balance both revenues and costs to
set price using profit-oriented approaches. These might either
involve a target of a specific dollar volume of profit or express this
target profit as a percentage of sales or investment.
Approaches are target profit pricing, target return-on-sales
pricing, target return-on-investment pricing
Panasonic expects to be a
leader in the successful
commercialization of HDTV.
P = $53.50
$66,875
2. TARGET RETURN-ON-INVESTMENT
- A method of setting prices to achieve return-on-investment.
Firms such as the Development Bank of Singapore set annual
return-on-investment (ROI) targets such as ROI of 20 percent.
.Suppose the store owner sets a target of ROI of 10 percent,
which is twice that achieved the previous year. She considers
raising the average price of a framed picture to $54 to $58up
from last years average of $50.
Results of
computer
spreadsheet
simulation to
select price
to achieve a
target return
on
investment
Competition-Oriented Approaches
Rather than emphasize demand, cost, or profit factors, a price
setter can stress what competitors or the market is doing.
Approaches are customary pricing, above-, at-, or belowmarket pricing.
1. CUSTOMARY PRICING
- Used for some products where tradition, a standardized
channel of distribution, or other competitive factors dictate the
price.
.Tradition prevails in the pricing of Swatch watches. The US$40
customary price for the basic model changed little in 10 years.
3. LOSS-LEADER PRICING
- Selling of products below its customary price to attract
attention to it.
.Supermarkets such as NTUC FairPrice and Prime often sell
soft drinks, cooking oil, or tissue paper at about half of their
suggested retail price to attract customers to their stores.
Step 4