Docstoc

factors affecting pricing contd

Document Sample
factors affecting pricing contd Powered By Docstoc
					Other factors affecting pricing

          …continued
           2. Marketing Boards
• Organizations designed to help market or sell
  commodities
  –   Advertise
  –   Provide marketing info
  –   Conduct research
  –   Charge a fee to all producers

  Example:
• Often set the price of
  commodities
• Sometimes set the quantity
• Quota: Legal amount of a
  commodity that one producer
  can make
  – Quota can be bought and sold
       3. Product Positioning
• Premium Pricing: High-pricing strategy
  used to position a product as a luxury

Example:
• Discount Pricing: Reduced price from what
  a customer would expect to pay

Example:
        4. Consumer Demand
• Price Elasticity: How much can a price be
  increased before customers stop buying




     Elastic                   Inelastic
 Customers will pay       Customers will NOT pay
   higher prices               higher prices
            5. Competition
• Forces sellers of similar products to
  remain close in pricing

Example:
          Pricing Strategies

Pricing Strategy: A plan developed by a
  business to make sure its product prices
  meet marketing objectives

3 main strategies…
          1. Market Skimming

Market Skimming: Setting an initially high
 price before competitors enter the market.
 Then lowering the price as competition
 increases or new technology emerges.

Example
Advantages
• Business tries to recoup its R&D costs
  before competitors copy (break even
  sooner)
• Can limit demand until production catches
  up

Disadvantage
• Competitors can undercut price, don’t have
  the same R&D costs
More examples of Market Skimming
First Battery-Powered Calculator (1970)



                                          $1,200
                                          $5,800 today
First VCR (1972)



                   $5,000
                   $22,600 today
First portable radio (1937)



                              $350
                              $4,600 today
         2. Penetration Pricing

Penetration Pricing: Setting an initially low
 price to attract customers

• Usually happens when VC are low and R&D costs
  (FC) are high
• Taken to the extreme, it becomes predatory pricing
Advantages
• Keep competitors out
• High sales volume
• Economies of scale

Disadvantage
• Need to sell huge volume to hit break-even
  point
        3. Competitive Pricing

Competitive Pricing: Closely following the
 prices of competitors. Typically, pricing
 follows the market leader who sets a
 benchmark price

Example
        3. Competitive Pricing
• Because price is not a major competitive
  advantage, the battle for market share is fought
  with advertising, promotion, distribution, &
  unique product features
• Some retailers have a competitive price police –
  they advertise that they will not be undersold
  and that they will match or beat any advertised
  price offered by their competitors
  – The onus is on the consumer to prove that there is a
    price difference
Advantage
• Will not be undersold by competition

Disadvantage
• Cannot use price to position your products
                Homework
• List 5 items you buy regularly and the
  price you normally pay
  – At what price would you be willing to buy
    more of the product?
  – At what price would you buy less?
• List the three main pricing strategies, and
  explain when a marketer would use each

				
DOCUMENT INFO
Shared By:
Categories:
Tags:
Stats:
views:6
posted:9/16/2011
language:English
pages:19