1 / 10

Financial Analysis: Estimate Price

Feasibility Analysis: Part 4A. Financial Analysis: Estimate Price. Paper #3 Entrepreneurship & Innovation. Factors affect price. The product price is determined by the value created. for the customer. Think about distribution channel. Cost-based strategies.

colton
Download Presentation

Financial Analysis: Estimate Price

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Feasibility Analysis: Part 4A Financial Analysis: Estimate Price Paper #3 Entrepreneurship & Innovation

  2. Factors affect price

  3. The product price is determined by the value created. for the customer.

  4. Think about distribution channel

  5. Cost-based strategies • Based on achieving a given margin over and above costs of manufacturing, marketing and distribution. • Cost-Plus: Price = full cost + mark-up (as a % of full cost) • Mark-Up: Price = direct cost + mark-up (as a % of direct cost). This technique is preferred to Cost-Plus for products with a relevant percentage of direct costs on total costs.

  6. Break-Even Analysis: Price = variable costs + fixed costs/quantity.

  7. Pricing strategies Low High Quality Penetration Economy e.g. Store Brand spaghetti Low Price Skimming e.g. New film or album Premium e.g. LVMH High

  8. Pricing strategies • Premium pricing • Uses a high price, but gives a good product/service exchange e.g. Concorde, The Ritz Hotel • Penetration pricing • offers low price to gain market share - then increases price • e.g. France Telecom - to attract new corporate clients (or Telewest cable) • Economy pricing • placed at ‘no frills’, low price • e.g. Soups, spaghetti, beans - ‘economy’ brands

  9. Price skimming • where prices are high - usually during introduction • e.g new albums or films on release • ultimately prices will reduce to the ‘parity’ • Product line pricing • rationale of a product range • e.g. MARS 32p, Four-pack 99p, Bite-size £1.29

  10. Optional product-pricing • e.g. optional extras - BMW famously under-equipped • Captive product pricing • products that complement others • e.g Gillette razors (low price) and blades (high price) • Product-bundle pricing • sellers combine several products at the same price • e.g software, books, CDs.

More Related