Pricing

The Marketing Mix 1)Product 2)Pricing 3)Place 4)Promotion

Price Why do certain products cost what they do? Work with a group of 3 around you and find a single product to discuss with the class from the flyer you receive Chose 4 or 5 products and list as many reasons you can think of as to why that product has that specific price

Determining the Price

Price West 49 is currently selling these shoes for $89.99

Price West 49 will purchase the shoes from Vans for a price of $60 The customer will then pay $ tax – The extra $29.99 that West 49 added is called “Mark-Up” West 49 has to keep in mind – What are the shoes being sold at elsewhere? – What will the price say about the shoe? – Do they have a limited supply? – How will the consumer react to the price?

Mark-up Price Why do stores charge a mark-up to the items that they sell? Mark-Up is usually presented as a % of the final selling price – (Mark-up / Selling Price) x 100 – Example: (29.99/ 89.99) x 100 = 33% Mark-up Some mark up can be as low as 1% and others can be as high as 500%

Mark-Up

Price The amount that a store or business makes on top of the price that they paid for the product is called profit The profit a business makes is usually reinvested in the business to help run it day- to-day – Or may be distributed to owners

Price The biggest part of setting a price for a product or service is ensuring that you are covering your costs – After all.....the point of doing business is making money There are a couple categories that costs can be put into for products – Fixed Costs – Variable Costs

Fixed Costs These costs will not change regardless of the amount of products produced or the number of customers served Things like: – Research & Development Costs – Advertising Costs – Employee Costs – Automobile Costs – Etc

Fixed Costs

Variable Costs Costs that will go up with the amount of products that are produced – In the case of a service: the costs that increase with each customer served For the manufacturer of a tennis racket company – Variable Costs: strings, plastic casing material, packaging, labour to make each racket

Variable Costs

Pricing When a company decides what to sell its product/service at – it must be larger than the variable costs – Profit is made when this is the case – If the mark-up is large – that money will go towards paying off the fixed costs Example: Technology products high price to start