In: Business and Management

Submitted By Charlie17
Words 2292
Pages 10
Bulacan State University

The Price

One of the most important and complex decisions a firm has to make relates to pricing its products or services. If consumers or organizational buyers perceive a price to be too high, they may purchase competitive brands or substitute products, leading to a loss of sales and profits for the firm. If the price is too low, sales might increase, but profitability may suffer. Thus, pricing decisions must be given careful consideration when a firm is introducing a new product or planning a short or long- term price change.

Price and Pricing defined

Price is the money, good or service exchanged for the ownership or use of a good or service. Examples of various names of price are tuition for education, rent for use of asset, interest for use of money and fare for use of taxi or a bus ride.

Pricing may be defined as those activities involved in the determination of the price at which products that will be offered for sale considering the various objectives of the firm.

Demand Influences on Pricing Decisions

Demand influences on pricing decisions concern primarily the nature of the target market and expected reactions of consumers to a given price or change in price. Three primary considerations are demographic factors, psychological factors and price elasticity.

1. Demographic Factors

In the initial selection of the target market that a firm intends to serve, a number of demographic factors are usually considered. Demographic factors that are particularly important for pricing decisions include the following:

• Number of potential buyers, and their age, education and gender. • Location of potential buyers. • Position of potential buyers (resellers or final consumers). • Expected consumption rates of potential buyers. • Economic strength of potential buyers.

These factors help determine…...

Similar Documents


...[pic] [pic] PRICING POLICY Introduction The fastest and most effective way for a company to realize its maximum profit is to get its pricing right. The right price can boost profit faster than increasing volume will; the wrong price can shrink it Just as quickly. Yet many otherwise tough-minded managers shy away from initiatives to improve price for fear that they will alienate or lose customers. Consider the example of JCPenney stores for Queen sized mattress. The list price is $1699 and after giving away all discounts, the pocket price comes down to $630. Price realization is about decreasing price leakage, increasing pocket price and hence keeping a higher proportion of the list price that adds to the bottom line (profit). The leverage and payoff of improved pricing are high. Compare, for example, the profit implications of a 1 % increase in volume and a 1 % increase in price. For a company with average economics, improving unit volume by 1% yields a 3.3% increase in operating profit, assuming no decrease in price. On the other hand, 1% improvement in price, assuming no loss of volume, increases operating profit by 11.1 %. Improvements in price typically have three to four times the effect on profitability as proportionate increases in volume. Reverse also applies in this case: a mere 1 % price decrease for an average company, for instance, would destroy 11.1 % of the company's operating profit......

Words: 497 - Pages: 2


...Pricing Strategy Sabrina Morgan Strategic Market Pricing Dr. Green February 2, 2012 Pricing Strategy I have fond childhood memories. Some of them are centered around Saturday afternoons at Ollie’s. Ollie’s was the restaurant that my uncle Oliver opened when I was about eight years old. The restaurant was a charming neighborhood favorite known for its burgers and homemade shakes. I shared many meals there with my family. I had birthday parties there and worked for my uncle when I was in high school. The restaurant nestled in a residential area and near several local businesses thrived for many years through the patronage of neighbors and regulars within the community. My uncle retired and closed the restaurant closed the restaurant two years ago. Recently I inherited Ollie’s. I am now faced with the task of how to reopen the restaurant and which direction to take. My choices guide the success of my business . There are many factors to consider when venturing to open a new restaurant. The building isn’t new but my concept will be. My uncle’s concept was basically a full service family style restaurant with menus items for breakfast, lunch and dinner. When I think the kind of restaurant......

Words: 1593 - Pages: 7


...* The nature and dynamics of consumer response to price (price elasticities) * Pricing for specific customer segments and geographic markets * The role of fixed costs and variable costs in pricing decisions * The role of pricing in managing product inventory Background: The objective of the simulation was to maximise profits of Universal Car Rental Company. The simulation was run across three cities in Florida; Tampa, Orlando and Miami. Overall strategy: We adopted a strategy of offering the highest price achievable whilst maintaining 100% capacity utilisation irrespective of market share.   In the context of the scenario, where growth in demand outstripped supply and with only twelve ‘rounds’, we felt market share was not fundamentally important. In respect of setting the pricing level, we calculated the price elasticity of demand to give us an insight into the increment we could increase the price. We concluded that price elasticity of supply was irrelevant in the context of this simulation. Market Demand: customer price response We were quickly able to observe that weekday and weekend demand outstripped supply, we deduced that weekday demand was a proxy for business users and weekend demand was a proxy for leisure users. After running the simulation for the first quarter we were able to analyse the Price Elasticity of Demand (PED). In general we found that demand from business users was price inelastic, whereas leisure users were price sensitive....

Words: 334 - Pages: 2


...Developing Pricing Strategies and Programs Price is the one element of the marketing mix that produces revenue; the other elements produce costs. Prices are perhaps the easiest element of the marketing program to adjust; product features, channels, and even communications take more time. Price also communicates to the market the company’s intended value positioning of its product or brand. A well-designed and marketed product can command a price premium and reap big profits. But new economic realities have caused many consumers to pinch pennies, and many companies have had to carefully review their pricing strategies as a result. For its entire century-and-a-half history, Tiffany’s name has connoted diamonds and luxury. Tiffany designed a pitcher for Abraham Lincoln’s inaugural, made swords for the Civil War, introduced sterling silver to the United States, and designed the “E Pluribus Unum” insignia that adorns $1 bills as well as the Super Bowl and NASCAR trophies. A cultural icon—its Tiffany Blue color is even trademarked—Tiffany has survived the economy’s numerous ups and downs through the years. With the emergence in the late 1990s of the notion of “affordable luxuries,” Tiffany seized the moment by creating a line of cheaper silver jewelry. Its “Return to Tiffany” silver bracelet became a must-have item for teens of a certain set. Earnings skyrocketed for the next five years, but the affordable jewelry brought both an image and a pricing crisis for the company:......

Words: 19446 - Pages: 78


...Pricing Pricing is one of the most important elements of the marketing mix, as it is the only mix, which generates a turnover for the organization. The remaining 3p’s are the variable cost for the organization. It costs to produce and design a product , it costs to distribute a product and costs to promote it. Price must support these elements of the mix. Pricing is difficult and must reflect supply and demand relationship. Pricing a product too high or too low could mean a loss of sales for the organization. Pricing should take into account the following factors: 1. Fixed and variable costs. 2. Competition 3. Consumers To price this product we are going to use the cost based pricing method. The procedure of this method is that the product cost should be calculated first. To calculate the product cost we need to include the cost of operating the business, which includes raw materials, advertising, wages, rents, and other indirect cost incurred on the product. Once the product cost is calculated, then add the profit level to the product cost to get the selling price. We are using the market penetration pricing strategy to achieve high volumes of sales and deep market penetration of our new product. Calculation of selling price of our product Direct material cost Rs: 10.00 Direct labor cost Rs : 08.00 Variable production overhead Rs: 15.00 Fixed production overheads Rs : 10.00 Total cost ...

Words: 628 - Pages: 3


...service and pricing it high will help imprint that style image into the consumers mind. Many people believe you get what you pay for. A market research team will verify this willingness to pay a high price and thus support the demand curve. In the interest of being practical, variable and fixed costs need to be carefully calculated. A products price must cover cost plus yield a fair profit. In these figures, distribution and promotion decisions must be weighed. DirecTV should anticipate that the demand curve for a technological savy luxury electronic item will be inelastic. Maximizing profit margin should be DirecTV’s goal and realizing that the higher price may drive some consumers out of the market. The high price will still signal high quality and again will feed into the luxury positioning. For new luxury products with a select target group of households with abundant disposable income a good practice to maximize profit margin with skim pricing. This is especially effective when demand is expected to be relatively inelastic. Our target market, technologically savy upper class with disposable income, does not tend to be price sensitive. The plan is to skim the cream off the top. As the product life cycle progresses, there will be likely be changes in the demand curve and cost. At this time, the pricing policy will be re-evaluated. Although skimming is the basic component of the pricing strategy, there are additional approaches to pricing. Through......

Words: 700 - Pages: 3


...This paper written by John Gourville and Dilip Soman connects the two important dots which many people were unaware of i.e. Pricing and the consumption. The author starts the article by relating pricing with demand and with consumption.The firms give more importance to the former than the latter. In the world where word of mouth is considered to be an effective marketing strategy, companies are trying to make the customers to use the product so that they can increase the sales. To make this happen, firms must use the most important tool i.e. pricing. On the other side, consumers are more likely to use the product if they are aware of the cost. But there are some practices followed by the companies which hinder the above fact. Some of these pricing strategies are advance sales, price bundling, season tickets, etc. The author then explains each of these pricing tools with an example. Advance sales take place in most of the gyms, clubs and in magazine subscription. People are more likely to read the magazine if they pay cash each time they get the magazine than the subscription. The author then explains the mentality of the consumers with the term Sunk cost. Once the consumers are aware of the cost of the product, they are unlikely to forgo the product under any circumstances. Because they have paid for the product, it creates the feeling of wasting money and they end up using the product. He then explains that mode of payment also plays an important role while using the product...

Words: 539 - Pages: 3


...attend lower-demanded shows, but also extracts more revenue from customers who are only able to attend popular timeslots. Example: Ticket of Interest Mon-Thu Fri Weekend and Public Holidays Before 6pm After 6pm 2D Annabelle GV Plaza $8.50 $9.50 $12.50 $12.50 c) Benefit-based Pricing i) Cinema Versioning: Currently GV offers five different versions of cinemas: Standard, GV Gold Class, GVmax, D-box and Gemini . By offering customers different options with different benefits, GV can encourage those customers seeking greater utility to purchase ticket of the higher-priced cinemas like Gold Class, while those with minimal utility requirements and lower WTP can buy ticket of the standard cinema. ii) Movie Versioning: 3D movies give customers a more realistic experience, thus, are priced higher than 2D movies. Customers can self select the type of movie they want to watch depending on their willingness to pay and preference. iii) Add-on: GV adds complementary products such as popcorn, drinks and merchandises to its product offerings together with the movie tickets to serve customers who wish to have snacks during the movie screenings. Similarly, online booking is also a form of add-on pricing where customers who derive extra utility from not queuing are charged $1.50 more. d) Loyalty-based GV Movie Club membership aims to capture customers’ lifetime value and lock customers into a long term relationship. Members of the club often enjoy ticket and snack discounts......

Words: 496 - Pages: 2


...perceived value of the product. Due to psychological pricing customers will interpret a lower price as lower quality of a product which may discourage some customers from purchasing at the proposed dropped price. Price cuts tend to have an adverse effect on how customers see the brand as price and brand image are closely tied together. This will either decrease the sales of the product as customer’s will have a lower perceived value or boost sales as customers believe they are getting a great deal. If it is to boost sales our client must be aware of the cost of producing for the extra demand and whether it outweighs the extra sales revenue they will be receiving from the demand. If it becomes more expensive to produce for the extra demand than the sales they will receive it is not worth reducing the price as they will be losing money. If the client is looking to reduce the price for a short period of time I suggest they use promotion pricing as their price adjustment strategy rather than just a straightforward reduction in the retail price. With promotion pricing the client could temporarily reduce sales to increase short term profit. This would increase the demand as desired but communicate to the customers that this lowered price is only for a short period of time and prepares them that in the future the price will increase either to its original price or more. This would retain the costumer perceived value as in promotion pricing the customer believes they are getting a......

Words: 696 - Pages: 3


...Marketing 635 MARKETING ANALYTICS AND PRICING Fall 2015 MW 9:35-10:50 – WCBA 184 Instructor: Office: Office Hours: Office Phone: E-mail: Website: Dr. Yan Liu 220U Wehner Building by appointment 845-2547** **Outside of the classroom, my preferred method of communication is via e-mail. Please note that I will often use e-mail to communicate with you class information. I will send these messages to your neo email account, so please check this account on a regular basis. Required Materials (1) Text Book  (2) Nagle, Thomas T., John E. Hogan and Joseph Zale, the Strategy and Tactics of Pricing, Fifth Edition, Pearson-Prentice Hall, Upper Saddle River, NJ. Packet of Cases and Readings. (  Click the link above and set up a HBP account as a student if you don’t have one.(you can use any email address, not necessarily school email address)  Choose coursepack mktg653 and make the purchase (audio version of the cases are optional).  You have one-year access to this online course pack.  Please save the cases to your computer for future usage.  Although you purchase digital version of the cases, you can print them out if you wish. Course Prerequisite Completed MKTG 625 Course Description This course is designed to introduce you to pricing fundamentals and pricing strategies. The course is quantitative in nature and will cover a number...

Words: 4739 - Pages: 19


...SUMMER 2007 V O L . 4 8 N O. 4 Arvind Sahay How to Reap Higher Profits With Dynamic Pricing Please note that gray areas reflect artwork that has been intentionally removed. The substantive content of the article appears as originally published. REPRINT NUMBER 48415 pricing How to Reap Higher Profits With  Dynamic Pricing S un Microsystems Inc. chairman Scott McNealy forecast that “With recent advances in wireless and information technology, even our cars could … call for bids whenever the fuel tank runs low, displaying a list of results from nearby gas stations right on the dashboard.”1 It sounds far-fetched. But dynamic pricing — where prices respond to supply and demand pressures in real time or near-real time — is making inroads in many different sectors, including apparel, automobiles, consumer electronics, personal services (such as haircuts), telecommunications and second-hand goods. The advent of the Internet led to cost transparency, decreased search costs and ease of price comparison. Some observers concluded that as a result, prices would decrease and equalize across different channels, and that fixed prices would continue to be the norm.2 However, price dispersion continues to be widespread and dynamic pricing is entering new sectors. EBay Inc. used auctions to sell more than $20 billion worth of goods in 2005. Ford Motor Co. sold more than $50 billion worth of automobiles in North America with demand-based DP in......

Words: 6384 - Pages: 26

Pricing Production, Manufacturing and Logistics Pricing decisions for complementary products with firms’ different market powers Jie Wei a,⇑, Jing Zhao b, Yongjian Li c a General Courses Department, Military Transportation University, Tianjin 300161, PR China School of Science, Tianjin Polytechnic University, Tianjin 300160, PR China c Business School, Nankai University, Tianjin 300071, PR China b a r t i c l e i n f o Article history: Received 25 July 2011 Accepted 5 September 2012 Available online 11 September 2012 Keywords: Pricing Complementary products Market power Stackelberg game a b s t r a c t This article reports the results of a study that explores the pricing problems with regard to two complementary products in a supply chain with two manufacturers and one common retailer. The authors establish five pricing models under decentralized decision cases, including the MS-Bertrand, MS-Stackelberg, RS-Bertrand, RS-Stackelberg, and NG models, with consideration of different market power structures among channel members. By applying a game-theoretical approach, corresponding analytic solutions are obtained. Then, by comparing the maximum profits and optimal pricing decisions obtained in different decision cases, interesting and valuable managerial insights are established. Ó 2012 Elsevier B.V. All rights reserved. 1. Introduction Pricing policy has long been recognized as a significant tool for use in the profit...

Words: 11966 - Pages: 48


...beverages and not be affected to the customers’ purchasing power by any problem. From 2015, F&N had announced their soft drinks with 500ML price are just RM1 for each one. This pricing strategy are helpful for the company and giving customers many benefits. When we are feeling thirsty, we can go any convenience stores to find these soft drinks and solve our thirsty problems. For customers can buy more with the cheap price and focus on this products and also not looking for any expensive soft drinks in thirsty situation. The one of famous soft drink is 100Plus. As this products that can able to let patient to drink exactly the needs of the customers. Not only that, F&N also doing one of the similar pricing strategy for the customers. This means customers need to buy RM6+22oz F&N drink in a single receipt to get a soft drink. This pricing strategy able to sell more the slow-moving products and their goods to the customers and raise the sales. Even that, this pricing strategy also can let the customers become more loyal because the customers’ needs are satisfied by providing this. Another one pricing strategy is the multiple-unit pricing strategy has been deployed by F&N long time ago. Customers purchase the same products and can get a lower price than buying one. This pricing strategy not only able to get more sales, this also can attractive to the customers by this way. For example, F&N Orange is priced RM2 and if buy 2 of them so will only cost at......

Words: 535 - Pages: 3


...Pricing is one of the four important elements of marketing mix. Pricing of the handheld scanner is based on production, advertising, and labor, after all these things are looked into a percentage is then considered to make a profit. For the handheld scanner to be successful a pricing strategy needs to be set into place and finding a price point. Setting a price for the new handheld scanner must follow several steps: With these steps incorporated the proper pricing strategy that will be appropriate for the handheld scanner is, Product Life Cycle Pricing. This type of pricing is for unique products like the handheld scanner. Products have life spans, and go through cycles, the introduction, growth, maturity, and decline stages (Richards, 2012). The introduction cycle when the handheld scanner is introduced to such business as Wal-Mart and other retail stores, and this is when consumers and business become aware of the benefits of the handheld scanner. The growth cycle, is the cycle when the sales of the handheld scanner will be booming and the pricing of the scanner will be higher. The handheld scanner is a new technology and soon will be in high demand because of its capabilities, at this time setting the price higher will be the appropriate action. The maturity cycle, when profits are high, sales increase at a slow pace. Advertising expenses decrease because the handheld scanner is well known and both businesses and consumers have a strong awareness of the......

Words: 301 - Pages: 2


...and Perceived Quality Measuring customer value * Company This stresses on the alignment of marketing strategy with pricing strategy Price In arriving at price, the following factors were considered. * Price sensitivity of target segment: Notably within our target segment, they are not price sensitive given the differentiated product and service. * Price flexibility of target segment: In saying that however, the price sensitivity is wide since they are willing to pay high prices as well as low prices. In that sense the price band width is large within the targeted segment. * Importance of price: Price is relatively unimportant as other attributes such as health concerns and quality were ranked higher than price during the concept testing stage. Cost Price is assumed to be greater than variable cost since we are profit making enterprise * Variable cost: Costs are not that high given that supplies are bought in bulk and the buyer’s purchasing power is not that big given the frequency of deliveries. Brand Positioning: Given that The Bread Break positions itself as a premium product (refer to above) Pricing objective Has to be aligned with company and brand strategy The Bread Break is confident of capturing most of customers’ market value hence premium pricing is adopted Pricing tactics Used to enhance demand * Complimentary Pricing: This was done because since our survey has shown that our target segment would take to this as it would give them......

Words: 741 - Pages: 3

Sicario El Dia Del Soldado BluRay-Screeener | Wallpapers | Jason Bourne 2016 HC 720p HDRiP x264 ShAaNiG mkv