Objectives Setting the Price Adapting the Price Initiating Responding to Price Changes @2000 Prentice Hall
©2000 Prentice Hall Objectives Setting the Price Adapting the Price Initiating & Responding to Price Changes
Types of Costs Fixed Costs Variable Costs (Overhead) Costs that don't Costs that do vary vary with sales or directly with the production levels level of production. Executive Salaries Raw materials Rent Total Costs Sum of the fixed and variable costs for a iven Level of production @2000 Prentice Hall
©2000 Prentice Hall Types of Costs Total Costs Sum of the Fixed and Variable Costs for a Given Level of Production Fixed Costs (Overhead) Costs that don’t vary with sales or production levels. Executive Salaries Rent Variable Costs Costs that do vary directly with the level of production. Raw materials
Pricing Methods Markup Pricing Target Return Pricing Perceived Value Pricing Value Pricing Going-Rate Pricing Sealed-Bid Pricing @2000 Prentice Hall
©2000 Prentice Hall Pricing Methods Markup Pricing Target Return Pricing Perceived Value Pricing Value Pricing Going-Rate Pricing Sealed-Bid Pricing
Some important pricing definitions Utility: The attribute that makes Value EXample: Caterpillar it capable of want satisfaction Tractor is $100, 000 VS Market Value: The worth in terms of 90,000 other products $90,000 if equal Price: The monetary medium of 7.000 extra durable exchange 6,000 reliability 5.000 service 2,000 warranty S110,000 in benefits $10,000 discount! @2000 Prentice Hall
©2000 Prentice Hall Some important pricing definitions Utility: The attribute that makes it capable of want satisfaction Value: The worth in terms of other products Price: The monetary medium of exchange. Value Example: Caterpillar Tractor is $100,000 vs. Market $90,000 $90,000 if equal 7,000 extra durable 6,000 reliability 5,000 service 2,000 warranty $110,000 in benefits - $10,000 discount!
Psychological Pricing Most Attractive? A Better value? 2.19 320z Psychological reason to price this way? B $1.99 260z Assume Equal Quality @2000 Prentice Hall
©2000 Prentice Hall Psychological Pricing Most Attractive? Better Value? Psychological reason to price this way? A 32 oz. $2.19 B 26 oz. $1.99 Assume Equal Quality