Transcript Low prices
Price “The exchange value of a good or service in the marketplace.” Value is based on: Tangible and intangible benefits Consumers’ perceptions of a brand Canadian Marketing in Action, 6th ed. Keith J. Tuckwell ©2004 Pearson Education Canada Inc. 10-1 Importance of Price An organization must establish fair and competitive prices while generating adequate revenues and profit. Wal-Mart Low prices (value) attracts customers. Harry Rosen The image created by high prices attracts customers. Canadian Marketing in Action, 6th ed. Keith J. Tuckwell ©2004 Pearson Education Canada Inc. 10-2 Factors Influencing Price Nature of Market Consumers Price Profit Objectives Costs Channel Members Canadian Marketing in Action, 6th ed. Keith J. Tuckwell ©2004 Pearson Education Canada Inc. 10-3 Nature of Market The market structure and the degree of competition in the market influences pricing strategy. Monopoly Oligopoly Monopolistic Competition Pure Competition Canadian Marketing in Action, 6th ed. Keith J. Tuckwell ©2004 Pearson Education Canada Inc. 10-4 Consumer Demand and Price Principle: 1. Consumers purchase greater quantity at lower prices. 2. The effect of a price change on demand must be factored into pricing strategy. Price Elasticity of Demand: Measures the effect of a change in price on the quantity purchased. Canadian Marketing in Action, 6th ed. Keith J. Tuckwell ©2004 Pearson Education Canada Inc. 10-5 Elasticity of Demand Elastic Inelastic Small change in price; large change in volume Change in price does not have significant impact on volume Canadian Marketing in Action, 6th ed. Keith J. Tuckwell ©2004 Pearson Education Canada Inc. 10-6 Channel Members Influence Price Mfg’r Wholesaler Manufacturers want distributors to charge prices that agree with their marketing strategy. Retailer Consumer 1. Adequate Margin 2. Fair Treatment 3. Special Deals 4. Impact of Increases Canadian Marketing in Action, 6th ed. Keith J. Tuckwell ©2004 Pearson Education Canada Inc. 10-7 Costs Influence Price All attributed costs and the desired profit margin influence the price charged. Costs can be controlled by: Improving operational efficiency Less expensive materials Shrinkage Relocation of manufacturing Canadian Marketing in Action, 6th ed. Keith J. Tuckwell ©2004 Pearson Education Canada Inc. 10-8 Pricing Objectives Objectives are : Objectives Sales Profit ROI Stated in quantitative terms Influenced by competitive activity Influenced by cost increases from suppliers Canadian Marketing in Action, 6th ed. Keith J. Tuckwell ©2004 Pearson Education Canada Inc. 10-9 Competitive Pricing Pricing decisions help establish a desired competitive position in the marketplace. Above competition Equal to competition Below competition “Everyday low prices. Always! Canadian Marketing in Action, 6th ed. Keith J. Tuckwell ©2004 Pearson Education Canada Inc. 10-10 Pricing Methods Cost-Based Pricing Total costs plus profit determines price Demand-Based Pricing What consumers will pay determines price Competition-Based Pricing Position relative to competition determines price Canadian Marketing in Action, 6th ed. Keith J. Tuckwell ©2004 Pearson Education Canada Inc. 10-11 Break-Even Analysis A break-even analysis shows how many units must be sold to exactly break even, given fixed and variable costs, and a price. Above the BEP, the firm makes a profit. Canadian Marketing in Action, 6th ed. Keith J. Tuckwell ©2004 Pearson Education Canada Inc. 10-12 Demand-Minus Pricing The reaction of customers at retail determines the price to be charged. Demand-Minus Pricing Chain Mark-up Pricing Working back from the retail price, the manufacturing cost is determined. A mark-up is added at each level of the channel. Canadian Marketing in Action, 6th ed. Keith J. Tuckwell ©2004 Pearson Education Canada Inc. 10-13 Pricing and the Law Price Claims that Mislead Improper Use of MSLP Double Ticketing / Bar Code Variances Bait and Switch Predatory Pricing Price Fixing Canadian Marketing in Action, 6th ed. Keith J. Tuckwell ©2004 Pearson Education Canada Inc. 10-14 Bartering Exchanging goods and services for other goods and services rather than for money. It is a reciprocal agreement among participants. Barter Exchange Operations Corporate Barter Companies Canadian Marketing in Action, 6th ed. Keith J. Tuckwell ©2004 Pearson Education Canada Inc. 10-15 Online Auctions An auction is a method of sale whereby an object for sale is secured by the highest bidder. B2B Lowest price bid often wins B2C Consumers compete against one another to drive up price of item C2C Canadian Marketing in Action, 6th ed. Keith J. Tuckwell ©2004 Pearson Education Canada Inc. 10-16