1 / 28

Price

Goals Identify pricing objectives for a business. Calculate the price for products using various methods. Discuss factors to consider when pricing services. List and describe various pricing techniques. Price . return on investment market share demand-based pricing cost-based pricing

zita
Download Presentation

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. Goals • Identify pricing objectives for a business. • Calculate the price for products using various methods. • Discuss factors to consider when pricing services. • List and describe various pricing techniques. Price

  2. return on investment • market share • demand-based pricing • cost-based pricing • competition-based pricing • psychological pricing • discount pricing Terms

  3. price • the amount a customer pays for a product or service • needs to be low enough that customers buy from you • needs to be high enough so revenues exceed expenses Set Pricing Objectives

  4. Objectives for a pricing program should be established prior to selecting a pricing strategy. • Objectives might include: • maximize sales • discourage competition • establish an image • increase profits • attract customers Set Pricing Objectives

  5. investment • the costs of making and marketing a product • return on investment (ROI) • amount earned as a result of the investment (usually expressed as a percentage) Return on Investment

  6. market share • a business’s percentage of the total sales generated by all companies in the same market • The total market for a product must be known in order for market share to be determined. Market Share

  7. Amount of Sales ÷ Total Market Size • Market Share =

  8. lowering prices • advertising and promotion • networking with potential customers • There are multiple ways to increase market share including:

  9. Why is it important to determine pricing objectives before pricing goods and services?

  10. There is usually more than one price that can be charged for a product. Determine a Price for a Product

  11. demand-based pricing • pricing that is determined by how much customers are willing to pay for a product or service • Survey customers to determine what they would be willing to pay for a product. • The highest price identified is the maximum price that can be charged. Demand-Based Pricing

  12. cost-based pricing • determined by using the wholesale cost of an item as the basis for the price charged • markup price • determined by adding a percentage amount to the wholesale cost of an item Cost-Based Pricing

  13. Wholesale cost × Percentage markup • Retail Price = Wholesale cost + Markup amount • Markup amount =

  14. determined by subtracting a percentage amount from the retail price • markdown price

  15. Retail price × Percentage markdown • Markdown Price = Retail Price - Markdown amount • Markdown amount =

  16. competition-based pricing • pricing that is determined by considering what competitors charge for the same good or service Competition-Based Pricing

  17. To set a price for a service, consider the following: • the cost of items used in providing the service • the amount of time required to produce the service Price a Service

  18. The amount of time it takes to complete a service will be the basis for determining the price of the service. • Providers must decide whether the cost of materials will be: • included in the price • listed as a separate charge Time-Based Pricing

  19. bundled pricing • when all services are combined under one charge Bundling

  20. Which method would be the best for a housepainter to use to price services? Why? Chapter 5

  21. Pricing can make or break a business. • Pricing techniques may change over time. Pricing Techniques

  22. price skimming • used for products that are new and unique • a high price is charged to cover product development costs • penetration pricing • a low introductory price is charged to build a strong customer base • discourages competition Introductory Pricing

  23. psychological pricing • certain prices have an impact on how customers perceive a product • used most commonly in retail Psychological Pricing Chapter 5

  24. Techniques used in psychological pricing include the following: • prestige pricing • a high price to create a feeling of superiority • odd/even pricing • prices ending in odd numbers are perceived to be bargains

  25. price lining • for a specific category of products • offering different prices • based on specific features and qualities • promotional pricing • temporarily offering lower prices to increase sales • multiple-unit pricing • pricing items in multiples • consumers buy more units if they perceive a bargain

  26. discount pricing • offers customers a reduced price • encourages purchases Discount Pricing

  27. Techniques used in discount pricing include the following: • cash discounts • encourages early payment of invoices • quantity discounts (volume discounts) • offers lower prices based on the purchase of a large quantity

  28. Trade Discount • when a manufacturer offers a discount to wholesaler or buyer in the same trade • seasonal discounts • used to sell seasonal merchandise out of season Chapter 5

More Related