Transcript Pricing Products and Services

Marketing 1
The value in money (or it’s equivalent)
placed on a good or service
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Usually expressed in monetary terms
May also be expressed in non-monetary terms
such as free goods or services in exchange for
the purchase of a product
Barter system is oldest form of pricing
Barter is exchanging one product for another
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Customer’s perceived value makes difference
in how much they will be willing to pay
Value is anticipated satisfaction of the
customer
If consumer believes they will receive higher
satisfaction they will more willing to pay
higher price
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Seller must be able to gauge where the price
will rank in customer’s estimation (whether
valued highly or not)
Seller objective is to set price high enough to
make profit for business yet not so high that it
exceeds the value perceived by the potential
customer
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Involved in every marketing exchange (dentist,
clothing, toll road or toll bridges, rental of
apartment, wages or salaries for employees,
etc.)
Price is important factor in success or failure of
a business
Helps establish and maintain firm’s image,
competitive edge, and profits
Customers make judgments based on price
(higher price means better quality…???)
Internal Factors
and
External Factors
help determine price!
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Cost of Goods
Operating Expenses
Product Mix (includes product quality,
trendiness or consumer liking)
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Supply and Demand
Government Regulations
Competition
Natural Events (Disasters)
Economic Events (Recessions)
Pricing Goods
• Manufacturing
• Shipping
• Packaging
• Storage Costs
Pricing Services
• Labor
• Related Product Costs
• Related Equipment Costs
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Price is the value in money (or non-monetary
exchange) for the exchange of a good or service
Customers’ perception of value of product
determines their willingness to pay that
exchange
Seller must be able to gauge customer
perception and price to generate profit but
meet customer expectation
Pricing is determined by internal and external
factors
Goods and services have different
considerations for pricing
Pricing is KEY to business success or failure
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What are the market factors that affect price? How
might each factor affect price?
Based on the current economy, how might economists
predict trends in pricing?
How do the global economy and political climate affect
price? How can this be seen in today's market?
What effect do expenses have in determining the
selling price?
How does price affect place decisions?
How does the stage in the life cycle affect pricing the
product?
How does supply and demand affect price?
You must determine the price you will charge retailers for a box of
disposable cleansing cloths, which is a new product. Competing
brands retail for between $5.99.
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Assume your cost of manufacturing and marketing this new
product is $2.75 per box. Remember to include a profit margin in
the price you will charge retailers.
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To be competitive, you need to consider the suggested retail price
that retailers will charge the final consumer. In this example
assume retailers will double the price the pay for the item when
calculating the price they charge their customers.
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You expect to make 200,000 boxes of these disposable cloths at the
price you will be charging retailers.
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What will be your price to the retailer?
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What will be your “break-even” point?
Break-even point is the point at which the sales revenue (income) is
equal to the costs of manufacturing, distributing, and marketing the
product or service.
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