Principle of Marketing-price and description .pptx

Accountancy Business Management

1. Factors to Consider When Setting Prices and its General Pricing Approaches

2. MELC identify and describe the factors to consider when setting prices and new product pricing and its general pricing approaches

3. PRICE is the amount of money charged for a product or service, or the sum of the values that consumers exchange for the benefits of having or using the product or service.

4. DYNAMIC PRICING charging different prices depending on individual customers and situations. VARIABLE COST are costs that vary directly with the level of production.

5. TOTAL COST is the sum of the fixed and variable costs for any given level of production. MONOPOLISTIC COMPETITION a market in which many buyers and sellers trade over a range of prices rather than a single market price

6. PURE MONOPOLY a market in which there is a single seller – it may be a government monopoly, a private regulated monopoly, or a private non-regulated monopoly.

7. Figure 1. Factors affecting price decisions

8. Figure 2. Four price positioning strategies.

9. Market-skimming pricing Many companies that invent new products initially set high prices to ‘skim’ revenues layer by layer from the market, a strategy called market-skimming pricing.

10. Market-penetration pricing Rather than setting a high initial price to skim off small but profitable market segments, some companies use market-penetration pricing. They set a low initial price to penetrate the market quickly and deeply – to attract many buyers quickly and win a large market share.

11. GENERAL PRICING APPROACHES cost-based approach (cost-plus pricing, breakeven analysis) buyer-based approach (perceived-value pricing) competition-based approach (going-rate and sealed-bid pricing) profit-orientation/based approach

12. Cost-based Pricing Is the practice of setting prices based on the cost of the goods or services being sold. A profit percentage or fixed profit figure is added to the cost of an item, which results in the price at which it will be sold.

13. Cost-Plus Pricing -the simplest pricing method. - adding a standard mark-up to the cost of the product

14. Break-even Analysis/Target Profit Pricing - Setting price to break even on the costs of making and marketing a product; or setting price to make a target profit.

15. Value-based Pricing - Setting price based on buyer’s perceptions of product values rather than cost

16. Competition-Based Pricing - Consumers will base their judgements of a product’s value on the prices that competitors charge for similar products. 2 forms of competition-based pricing Going-Rate Pricing -setting price based largely on following competitors’ prices rather than on company costs or demand Sealed-bid pricing - bases its price on how it thinks competitors will price rather than on its own costs or on demand

17. Profit-Oriented/Based Pricing profit = revenue – costs. In profit-oriented pricing, the price per product is set higher than the total cost of producing and selling each product to ensure that the company makes a profit on each sale

18. Mark-up/Mark-down -the difference between selling price and cost as a percentage of selling price or cost Pure Competition - A market in which many buyers and sellers trade in a uniform commodity-no single buyer or seller has much effect on the going market price.