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Price

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  1. Price • Price: the value of money placed on a good or service • Forms of price: • fees to dentist • $ for new shoes • taxi fairs • Rent • dues for DECA • tuition

  2. Importance of Price • Helps establish an image, competitive edge or profits • Walmart • lowes • Customer’s judge products based upon price • Ford Focus $8,000 • Cadillac Escalade $50,000

  3. Importance of Price • Flexibility – can be changed much more quickly than other marketing decisions (design, package, location)

  4. Pricing Objectives • Maximize Profit • Maximize Sales • Meet the competition • Achieve a ROI

  5. Maximize Profit • Goal: Make $$$ • Charge highest price possible • Done when you have monopoly on items • Ball Park

  6. Maximize Sales • Goal: Most Customers • Charge the Lowest price possible • Done with NEW products • Mountain Dew LIVEWIRE • 2/$1.00

  7. Meeting the Competition • Follow the leader in price • Calculate price and adjust accordingly • Gas stations • How do you compete without price competition? • Quality, uniqueness, convenience

  8. Setting Prices Don’t forget: You can copy-paste this slide into other presentations, and move or resize the poll.

  9. Return on Investment • Determines relative profitability of a product • __Profit__ investment Many companies price products to achieve a certain return on investment Convenience – 30% Retail 15% Gasoline 6-10%

  10. ROI-Return On Investment • PROFIT (Sales – Expenses) Investment #9 .35-.25 = ___ .25 = . Or ___%

  11. #13 • Dolls… • Sales 18,000 x75=1,350,000 1,350,000-1,245,500 = ___________ 1,245,500 = . _____ or _______%

  12. Beverage Project • With Partner, start on page 3 • How is it different…. • Features/Benefits • Ideal shape of containers • Bottle • Carrying case

  13. Olympic Winners Source: Thomson Reuters NIKE (NKE) Sponsors top Olympic athletes, including Apolo Ohno % change since Olympics started +2.6% Olympic sponsors pay millions to showcase brands during the Games. But do those sponsorships help raise stock prices? Suprisingly, yes. The Dow Jones Summer/Winter Games Index, which tracks 36 sponsors and suppliers, has risen 36% since the start of 2009, compared to the S&P 500’s gain of 18.9% in the same period. That’s a medal-worthy performance, indeed. • Nike • 25 Billion Dollar Company • +2% = 500,000,000 • Is it worth 10 million to be a sponsor of the Olympics? • ROI of % • =5000% GENERAL ELECTRIC (GE) Supplies games with generators and medical equipment % change since Olympics started +2.6% VISA (V) “The only card accepted” at the Olympic Games % change since Olympics started +1.6% COCA-COLA (KO) The longest continuous corporate Olympic sponsor % change since Olympics started +1.6% MCDONALD’S (MCD) Sells its food in the athlete’s village % change since Olympics started +2.0%

  14. Pricing Techniques • Customers often feel price is a reflection of quality. Only $19.99 On Sale for $700

  15. Pricing Techniques • Psychological Pricing – creates an illusion that appeals to particular market segments • 7 Methods • Discount Pricing – offering reductions from the usual price • 5 Methods

  16. Psychological Pricing • Odd- Even Pricing -.99, 2.99, 11.95 • Prestige pricing • Multiple-Unit Pricing • Bundle Pricing • Promotional Pricing - Loss leader, Sale • Everyday Low Prices • Price Lining

  17. Discount Pricing • Cash Discounts • Quantity Discounts • Trade Discounts • Seasonal Discounts • Promotional Discounts

  18. Case Study • Setting prices for T-Shirts

  19. Pricing Assignment- Odd - Even

  20. Prestige

  21. Multiple unit

  22. Bundle Pricing

  23. Promo Pricing…loss leader

  24. EDLP

  25. Price Lining

  26. What Pricing Strategy? Bundle

  27. What Pricing Strategy? Even

  28. What Pricing Strategy? Even

  29. What Pricing Strategy? Multiple Unit

  30. What Pricing Strategy? Prestige

  31. What Pricing Strategy? Even

  32. What Pricing Strategy? Multiple Unit

  33. What Pricing Strategy? Odd

  34. Bait and Switch Advertising • Offering a low price on a product that you don't intend on selling and switching a customer to a more expensive product.

  35. Pricing Laws • Sherman Antitrust act outlaws monopolies--Collusion-Company must have been proven to have been in contact with each other. (of 1890 -.) (example) • Clayton Act-Outlaws Price Fixing -competitors agree on certain price ranges within which they set their own prices. • Can the NFL limit production of team apparel? • example

  36. Robinson-Patman Act • Defines price discrimination and states that it creates unfair competition. • Price discrimination- when a firm charges different prices to similar customers in similar situations.

  37. Price Advertising laws • FTC developed guidelines • Sale - A company can not advertise a price reduction unless the original price was offered to the public on a regular basis. • May not say they have lower prices than competition without specific proof.

  38. Break Even • Tells a business the number of units needed to sell to start making a profit. • If I buy 72 Sweatshirts at $22 each. I sell them for $30 each. How many do I need to sell to break even? • Total amount of Cost + Expenses Selling Price

  39. Break Even • A firm expects to sell 10,000 widgets at $10 each. The cost of manufacturing and marketing them is $7.50 each. Calculate the break even point for the widgets. • Costs + Expenses Selling Price / Unit • 7.5x10,000 / $10 = 7,500 • What does this mean for the manufacturer?

  40. Mark up Pricing • Mark Up- the amount of profit desired by a business. • Cost + Markup = Price • I buy Pop Tarts for $.60 each. I want to make $.40 each. What is my SP? MU?

  41. REVIEW • Get a piece of Paper out! • Last year we sold $13,000 worth of product in April. This year we setting a goal to increase sales by 13 percent. What are our planned sales for April?

  42. Review-Pricing • 2. What is Mutiple Unit Pricing • Item a,b,c,d all for $20 • Item a sells for $10, b for $20 and c for $30 • If you buy 3 items for $15 • Items a is $10

  43. Review-Pricing • 3. What is Odd Unit Pricing • Item a,b,c,d all for $20 • Item a sells for $10, b for $20 and c for $30 • If you buy 3 items for $15 • Items a is $9.99

  44. Review - BE 4. I purchase 100 Dolls. They cost me $24 each and I anticipate selling them for $36 each. How many do I need to sell to break even?

  45. Mark up 5. If a swim suit costs the store $13.50 and the retailer has mark up of $11.75 how much is the Retail Price.

  46. Review…ROI 6. Jim and Jeni decide to sell lemonade to make some extra money. It costs them $.17 per glass to make lemonade. They decide to sell the lemonade for $.75 a cup. What is their ROI…(return on investment).

  47. ANSWERS • 1. 14690 • 2. C • 3. D • 4. 67 • 5. 25.25 • 6. 341%