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Other factors affecting pricing

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

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Other factors affecting pricing

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  1. Other factors affecting pricing …continued

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

  3. 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

  4. 3. Product Positioning • Premium Pricing: High-pricing strategy used to position a product as a luxury Example:

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

  6. 4. Consumer Demand • Price Elasticity: How much can a price be increased before customers stop buying Elastic Customers will pay higher prices Inelastic Customers will NOT pay higher prices

  7. 5. Competition • Forces sellers of similar products to remain close in pricing Example:

  8. Pricing Strategies Pricing Strategy: A plan developed by a business to make sure its product prices meet marketing objectives 3 main strategies…

  9. 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

  10. 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

  11. More examples of Market Skimming First Battery-Powered Calculator (1970) $1,200 $5,800 today

  12. First VCR (1972) $5,000 $22,600 today

  13. First portable radio (1937) $350 $4,600 today

  14. 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

  15. Advantages • Keep competitors out • High sales volume • Economies of scale Disadvantage • Need to sell huge volume to hit break-even point

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

  17. 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

  18. Advantage • Will not be undersold by competition Disadvantage • Cannot use price to position your products

  19. 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

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