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Price
Definition: The amount of money charged for a product. Most flexible element of marketing mix Gets us into the most trouble Price is dynamic because of environmental influences
Survival Survival Survival Survival Low Prices to Cover Variable Costs and Current Profit Maximization Current Profit Maximization
Choose the Price that Produces the Choose the Price that Produces the Maximum Current Profit, Cash Flow or ROI. Maximum Current Profit, Cash Flow or ROI.
Marketing-Mix Strategy
Distribution Distribution
Promotion Promotion
Costs that dont Costs that dont vary with sales or vary with sales or production levels. production levels. Executive Salaries Executive Salaries Rent Rent
Sum of the Fixed and Variable Costs for a Given Sum of the Fixed and Variable Costs for a Given Level of Production Level of Production
Many hospitality and travel companies now Many hospitality and travel companies now use revenue management departments use revenue management departments
External factors
Marketers must understand the relationship between price and demand for a product
Price
Q 2 Q1 Quantity Demanded per Period B. Elastic Demand Demand Changes Greatly With a Small Change in Price.
Price
P2 P1
Competition
Competitors prices and their possible reactions need to be considered when setting prices
Survival Maximum current profit Maximum market share Maximum market skimming Product-quality leadership
Markup pricing Target-return pricing Perceived-value pricing Value pricing Going-rate pricing Auction-type pricing
Markup pricing
The most elementary pricing method is to add a standard markup to the production costs VC= Rs 10 FC= Rs 3,00,000 Expected unit sales= 50,000 Unit cost = variable cost + fixed cost unit sales 20 % markup price Mrkup price = unit cost (1- desired return on sales)
Target-return pricing
In Target-return pricing the firm determine the price that would yield its target rate of ROI
unit sales
Auction-Type Pricing
Impact of other marketing activities Company pricing policies Gain-and-risk sharing pricing Impact of price on other parties
Price-Adaptation Strategies
Geographical Pricing Discounts/Allowances Promotional Pricing Differentiated Pricing
Price-Adaptation Strategies
Countertrade Barter Compensation deal Buyback arrangement Offset Discounts/ Allowances Cash discount Quantity discount Functional discount Seasonal discount Allowance
Loss-leader pricing Special-event pricing Cash rebates Low-interest financing Longer payment terms Warranties and service contracts Psychological discounting
Differentiated Pricing
Customer-segment pricing Product-form pricing Image pricing Channel pricing Location pricing Time pricing Yield pricing