Pricing
Marketing Co-Op
What is price?
Price:
the value placed on
the goods or
services being
exchanged
Profit Margins:
the percentage of
sales the company
has left over as
profit after paying
all expenses
How do businesses
make pricing decisions?
Constant change in the marketplace forces
businesses to review pricing decisions
frequently
Four key market factors:
1.
2.
3.
4.
Cost and expenses
Supply and demand
Consumer perception
Competition
Costs and Expenses
An increase in costs
and expenses
Example: When oil prices
go up you will see an
increase in airline
tickets, gas station
prices, and shipping
costs
How else would the businesses
maintain their profit margins?
There are other ways of bringing costs down
so that prices don’t have to be raised
Reducing the size
of an item
Drop features that
customers don’t value
Making a candy bar
3.5 oz. rather than
the normal 4 oz.
Airlines have stopped
serving in flight meals
Some companies choose to improve
features or upgrade materials in
order to justify the higher price
Costs and Expenses
A decrease in costs and expenses
Aggressive firms are always looking for
ways to increase efficiency and decrease
costs
This helps them be competitive in the
marketplace
Improved technology and less
expensive materials may help create
better quality products at a lower price
Costs and Expenses
Break even point – the point at
which sales revenue equals
the costs and expenses of
making and distributing a
product
After this point businesses will
start to make profit
Supply and Demand
As the price of a product goes up,
what happens to the demand?
And supply?
How about when the price goes
down?
Consumer Perceptions
●
Some customers equate
price with quality
●
They believe a high price
reflect high quality, status,
prestige, and exclusiveness
Companies create this
perception by:



Limiting the supply (ex:Wii)
Limited edition
Superior customer service or
added services for customers
Competition
When two products are very
similar, price often is the
sole basis on which
customers make their
buying decisions.
Customers are more willing
to buy the less expensive
brand if they see no
difference between the
products
Now it’s time for
some FUN!