Price – Steps in setting the price
Please write presentation for this subject and explain with real cases and picture
¬ How should a company set prices initially for products or services?
¬ How should a company adapt prices to meet varying circumstances and opportunities?
¬ When should a company initiate a price change?
¬ How should a company respond to a competitor’s price challenge?
♣ Select the price objective
2. Maximum current profit
3. Maximum market share (market penetration pricing)
4. Maximum market skimming
5. Product-quality leadership (affordable luxuries
♣ Determine demand
1. Price sensitivity
2. Estimate demand curves (surveys; price experiments; statistical analysis)
3. Price elasticity of demand
4. Demand sets a ceiling on the price a company can charge for it’s products.
♣ Estimate costs
a. Cost set the floor price a company must charge for it’s product.
b. Types of costs (fixed cost; variable cost; average cost; total cost)
c. Accumulated production (experience learning curve)
d. Activity-based cost accounting (the real cost associated with serving each customer)
e. Target costing
♣ Analyze competitor price mix
♣ Analyzing Competitor’s Costs, Price and Offers
♣ Select pricing method
1. Markup pricing
2. Target-return pricing
3. Perceived-value pricing (the worth of a product in the mind of a customer)
4. Value pricing (A value pricing is when businesses offer a fairly high quality product at a relatively low price; EDLP)
5. Going-rate pricing (competitor price; oligopolistic industries)
6. Auction-type pricing
♣ Select final price
1. In addition to cost, demand, competition other factors that influence final price are:
2. Impact of other marketing activities
3. Consistent with company’s overall pricing policies
4. Gain-and-risk sharing pricing
5. Impact of price on other parties (i.e. distributors, dealers etc.)
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