Chapter 17 Pricing Objectives and Policies. Pricing Strategy Determines 1] How flexible prices will be 2] At what level prices will be set over the Product.

Slides:



Advertisements
Similar presentations
19 Pricing Concepts Professor Close.
Advertisements

Chapter 13 Pricing concepts
Pricing Concepts Setting the Right Price
1 Pricing Concepts & Setting the Right Price. 2 The Importance of Price to Marketing Managers Revenue Profit The price charged to customers multiplied.
Chapter 10 Pricing Strategies
Copyright © Houghton Mifflin Company. All rights reserved. 13 | 1 Pricing …the amount of money a seller is willing to accept in exchange for a product.
Setting the Right Price
Foundations of Chapter M A R K E T I N G Copyright © 2003 by Nelson, a division of Thomson Canada Limited. Managing the Pricing Function 14.
Accounting for Merchandising Operations
For use only with Perreault/Cannon/McCarthy or Perreault/McCarthy texts. © 2008 McGraw-Hill Companies, Inc. McGraw-Hill/Irwin Pricing.
©The McGraw-Hill Companies, Inc. 2006McGraw-Hill/Irwin Chapter Five Accounting for Merchandising Businesses.
Chapter 4 Accounting for Merchandising Operations.
McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., Chapter 4 Reporting and Analyzing Merchandising Operations.
© The McGraw-Hill Companies, Inc., 2006 McGraw-Hill/Irwin Accounting for Merchandising Operations Chapter 5 5.
Accounting for Merchandising Operations
PRICING PRODUCTS AND SERVICES
© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/IrwinSlide 14-2 ARRIVING AT THE FINAL PRICE C HAPTER.
Chapter 30 – Pricing Strategies
Marketing Management Dawn Iacobucci
Chapter foundations of Chapter M A R K E T I N G Managing the Pricing Function 14.
For use only with Perreault/Cannon/McCarthy or Perreault/McCarthy texts. © 2008 McGraw-Hill Companies, Inc. McGraw-Hill/Irwin Pricing.
© 2002 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Steps in setting price.
Principles of Marketing
Pricing Chapter 12 PowerPoint slides Express version Instructor name
For use only with Perreault and McCarthy texts. © The McGraw-Hill Companies, Inc., 1999 Irwin/McGraw-Hill Chapter 17: Pricing Objectives and Policies.
Pricing Decisions.
+ Pricing The Marketing Mix PRICE. Introduction  The prices a company sets for its product and services must: 1) gain acceptance with the target customers.
Chapter 7 Pricing.
Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Chapter 19 Pricing Strategies.
Copyright © 2002 by Nelson, a division of Thomson Canada Limited. Chapter chapter 15 Prepared by Angela Zigras, Seneca College Deborah Baker,
Pricing Objectives and Policies
Copyright 2000 Prentice Hall13-1 Chapter 13 Pricing Methods.
Reporting & Analyzing Merchandising Operations
Chapter 17/18 Pricing / Pricing Strategies Describe typical company pricing objectives Discuss Market Share vs. Sales Review Break-Even Analysis Skimming.
Needles Powers Principles of Financial Accounting 12e Accounting for Merchandising Operations 6 C H A P T E R ©human/iStockphoto.
Pricing Strategies Chapter 26.1
Developing A Price Structure
For use only with Perreault/Cannon/ McCarthy texts, © 2009 McGraw-Hill Companies, Inc. McGraw-Hill/Irwin Chapter 17 Pricing Objectives and Policies
For use only with Perreault and McCarthy texts. © The McGraw-Hill Companies, Inc., 2000 Irwin/McGraw-Hill Chapter 16: Pricing Objectives and Policies.
9.00 Explain pricing strategies for making effective pricing decisions Calculate the selling price of merchandise and services. D. MARKETING A SMALL.
Developing A Price Structure Chapter 16. Price Administration Price administration is also concerned with handling price adjustments for sales made under.
For use with Shapiro, Wong, Perreault, and McCarthy texts. Copyright © 2002 McGraw-Hill Ryerson Limited. Chapter 17: Pricing Objectives and Policies.
1 18 & 19. Pricing Considerations & Approaches. 2 Topics Pricing constraints Pricing objectives General pricing approaches Price adjustment strategies.
Chapter 17 Pricing Objectives and Policies. Pricing Strategy Determines 1] How flexible prices will be 2] At what level prices will be set over the Product.
PRICING OBJECTIVES, POLICIES, STRATEGIES. A. PRICE MUST COVER: 1. COST OF GOODS SOLD –TOTAL AMOUNT SPENT TO PRODUCE OR BUY THE GOODS THAT HAVE BEEN SOLD.
CHAPTER 19 - Pricing Strategies. PRICING STRATEGIES 1. SKIMMING –involves use of relatively high price compared to competitor prices ie. New drug. 2.
Dr. Muslim Suardi, MSi., Apt.
STUDY OBJECTIVES After studying this chapter, you should understand: CHAPTER 6 ACCOUNTING FOR MERCHANDISING OPERATIONS CHAPTER 6 ACCOUNTING FOR MERCHANDISING.
Chapter 9: Pricing Objectives and Policies
© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin ARRIVING AT THE FINAL PRICE 14 C HAPTER.
BA 590 Module 2 Customer Needs. Key Terms Model of Buyer Behavior PSSP Pyramid Problem Solving Purchase Situation Organizational Buyer Needs.
1 Copyright ©2006 by South-Western, a division of Thomson Learning. All rights reserved Chapter 14 Pricing Concepts Prepared by Deborah Baker Texas Christian.
For use only with Perreault and McCarthy texts. © 2006 McGraw-Hill Companies, Inc. McGraw-Hill/Irwin CHAPTER SIXTEEN CHAPTER SIXTEEN.
Copyright  2004 McGraw-Hill Australia Pty Ltd PPTs t/a Marketing 4/e by Quester, McGuiggan, Perreault and McCarthy 12–1 Part 3: The marketing mix Chapter.
Accounting for Merchandising Operations Chapter 4 Copyright © 2016 McGraw-Hill Education. All rights reserved. No reproduction or distribution without.
“Price” Marketing Tool Pricing Strategies Calculate Price Discounts & Allowances Unit 5.
© The McGraw-Hill Companies, Inc., 2007 McGraw-Hill/Irwin Chapter 5 Accounting for Merchandising Operations.
Pricing Strategy.  Focus on the value of your product / service delivers  Value = perceived benefits Price Know your competitor Reward staff for sales.
Chapter 2 MR. MOHAMMED BABIKER - FALL-15/16 MR. MOHAMMED BABIKER - SPRING 15/16.
5 MERCHANDISING OPERATIONS AND THE MULTIPLE-STEP I/S.
Chapter 15 Ver 2e1 Chapter 15 ©2000 South-Western College Publishing Pricing Concepts Prepared by Deborah Baker Texas Christian University.
Financial Accounting John J. Wild Seventh Edition John J. Wild Seventh Edition Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction.
Chapter Accounting for Merchandising Operations ACCT
Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Part 7: Pricing Decisions 18.Price Concepts and Approaches.
BUSI 406 PRINCIPLES OF MARKETING: PRICING OBJECTIVES AND POLICIES.
Pricing Strategies and Tactics
Chapter 10 Pricing Strategies
Chapter 19 Pricing Strategies.
Marketing’s Role in the Global Economy
Presentation transcript:

Chapter 17 Pricing Objectives and Policies

Pricing Strategy Determines 1] How flexible prices will be 2] At what level prices will be set over the Product Life Cycle 3] To whom and when discounts and allowances will be given. 4] How transportation costs will be handled

Review some Terms Profit = Revenues - Costs Contribution = Revenues - Direct Variable Costs Unit Contribution = Selling Price – Unit Variable Costs Variable costs increase with every unit sold or produced Most (but not all) marketing costs are variable costs

Price Cuts & Increases Have a Direct Profit Impact You have a contribution margin of 20%, unit price = $100, 80 units were sold last month. You decide to cut your price 5%. How many units will you have to sell to have the same contribution as last month?

Price Cuts & Increases Last month’s unit contribution = $20 $20 unit contribution x 80 units sold = $1,600 contribution last month We would like to have a contribution of $1,600 or better this month.

Price Cuts & Increases New unit contribution = $20 - ($100 x.05) = $15 To make same contribution as last month $1,600 = $15x x = or 107 units (round up since you can’t sell partial units). Your sales must increase (107-80)/80 = 33.75% to make the same contribution

Price Cuts & Increases Note: Increasing or cutting prices usually does not effect the costs of a firm. If you can make a price increase stick and demand does not fall (much), your profitability is sharply increased. If you cut your price, you have to sell a LOT MORE UNITS to make the same profit level

Second Example Unit contribution = $15. Unit price = $50 Sold 300 units last year. You decide to cut prices 10%. How many units do you have to sell to have the same contribution as last year?

Example 2 continued Old total contribution = $15 x 300 = $4,500 New unit contribution = $15 - ($50 x.10) = $10 Units needed to be sold to make the same contribution as last year = $4,500 = 10x = 450 units Sales increase of ( )/300 = 50% Can you get this 50% sales increase?

Example 3 Unit contribution = $9, unit price = $90, sold 900 units last year. You decide to raise prices $10. How many units do you have to sell to have the same contribution as last year?

Example 3 cont. Total Contribution = $9 x 900 = $8,100 New unit contribution = $9 + $10 = $19 $8,100 = $19x = 427 units

Pricing Objectives 1] Target Return (459) 2] Profit Maximization (460) 3] Sales Oriented –Market share = Firms sales in units (dollars)/ – Industry sales in units ($s) Status Quo (460)

Product Life Cycle & Pricing Skimming (464) vs Penetration (466) Skimming –Recoup Costs Quickly –Aim at members of the target that have strongest desire –Helps with production & distribution Penetration - discourages competitive entry & builds market share quickly

Quantity Discounts Discounts offered to encourage customers to buy in larger amounts (469). Can be price cuts or free goods Often given due to economies of scale in production, distribution, & ordering Two types –Cumulative Quantity Discounts (469) –Noncumulative Quantity Discounts (469)

Cumulative vs Noncumulative Your firm sells plastic containers. Your price structure is: Less than 1000 units - $0.65 each units - $0.60 each units - $0.55 each 10,000 + units - $0.50 each

Cumulative vs Noncumulative 2 Zed buys 1200 units in January, 500 units in February and 3,800 units in March. What was the total price paid if the discounts were: –Cumulative? –Noncumulative?

Cumulative vs Noncumulative $3,025Cumulative: = 5500 units. Total price = 5500 x $0.55 = $3,025 Noncumulative 1200 x $0.60 = $ x $0.65 = $ x $0.60 = $2,280 $3,325Total = $3,325

Cash Discounts Reduction in price to encourage buyers to pay in cash (470). Ex: 2/10, net 30. Reads: 2% discount if paid in 10 days of the invoice date; full amount due in 30 days. What is the annual interest rate here?

Cash Discount Paying for 20 days use of the money (net day discount period) How many annual periods? 365/20 = Annual interest rate = 36.5% You can change credit terms by altering the net date, the discount period, or the discount %

Distribution Pricing F.O.B. - Free on Board some vehicle at some place. FOB delivered - seller pays freight and retains title until product is delivered (474) F.O.B. Shipper - buyer pays freight and takes title at the shippers loading dock.

Distribution Pricing F.O.B. Delivered (474) Zone Pricing (474) Uniform Delivered Pricing (474)

Legal Issues Price Fixing (480) (mins & maxes) Robinson Patman Act (480) –illegal to sell to different business buyers at different prices if it injures competition –Can have different prices if: Based on cost differences Meet the actions of competitors Must make allowances available to all customers on a proportionally equal basis unless there is a cost basis for doing so.