Marketing bán hàng - Chapter 18: Price setting in the business world

Chapter 18: Price Setting in the Business WorldWhen you finish this chapter, you should18-2Chapter 18 Objectives 1. Understand how most wholesalers and retailers set their prices— using markups. 2. Understand why turnover is so important in pricing.3. Understand the advantages and disadvantages of average-cost pricing. 4. Know how to use break-even analysis to evaluate possible prices. 5. Understand the advantages of marginal analysis and how to use it for price setting.6. Understand the various factors that influence customer price sensitivity.7. Know the many ways that price setters use demand estimates in their pricing. 8. Understand the important new terms.Exhibit 18-1Markup chainin channels18-3Key Factors That Influence Price SettingPricing objectivesDiscounts andallowancesLegal environmentPrice flexibilityGeographicpricing termsDemandCostPrice of otherproducts in the lineCompetitionPricesetting24.0030.0050.00ProducerWholesalerRetailerCost = 24.00 = 80%Markup = 6.00 = 20%Cost = 21.60 = 90%Markup = 2.40 = 10%Cost = 30.00 = 60%Markup = 20.00 = 40%Exhibit 18-218-4MarkupsSix Types of CostsTotal CostAverageFixed CostTotal VariableCostAverageVariable CostTotal FixedCostAverage Cost18-5Exhibit 18-6Total revenue = Price x Quantity $30,000 = $3.00 x 10,000 $40,000 = $2.00 x 20,000 $57,000 = $1.90 x 30,000 $66,000 = $1.65 x 40,000 $75,000 = $1.50 x 50,000 $72,000 = $1.20 x 60,00018-6Quantity (000)Price per unit10203040506070$3.002.001.901.651.501.20Prices Along the Demand CurveExhibit 18-7Estimated quantity to be soldAverage fixed cost per unitQuantity demanded at selling priceCost-oriented selling price per unitAverage total cost per unitVariable cost per unitProfit per unit?18-7Summary of Relationships Affecting PriceExhibit 18-818-8Break-even AnalysisTotal Revenue and CostUnits of ProductionBreak-Even PointProfit AreaTotal Fixed CostsTotal Variable CostsTotal Cost CurveTotal Revenue CurveLoss AreaMore0HigherMarginal AnalysisExhibit 18-1018-9Total profitQuantityTotal revenueTotal costBest profitfor quantityat best price= $106= 6= $792468Dollars8007006005004003002001000-100-200-300-400Note: curves here are approximate (you can’t sell part of a unit!)Evaluating a Customer’s Price SensitivityAre there substitute ways of meeting a need?Is it easy to compare prices?Who pays the bill?How great is the total expenditure?How significant is the end benefit?Is there already a sunk investment related to the purchase?18-10Demand-Oriented Pricing18-11Value-in-UsePsychologicalOdd-EvenBaitPrestigeLeaderPrice LiningDemand-BackwardReferenceTypes ofDemand-OrientedPricingFull-Line PricingProduct-BundlingPricing?ComplementaryPricing?Market- or FirmOriented??????????????????????????18-12Bid pricing means offering a specific price for each possible job. Determining costs is a complicated process.Negotiated pricing involves setting a price as the result of a bargaining process between the buyer and seller.18-13Bid and Negotiated PricingBreak-Even AnalysisBreak-Even Point (BEP)Fixed-Cost (FC) Contribution per UnitMarginal AnalysisMarginal RevenueMarginal CostRule for Maximizing ProfitMarginal ProfitPrice LeaderValue in Use PricingReference PriceLeader PricingBait PricingMarkupMarkup (percent)Markup ChainStockturn RateAverage-Cost PricingTotal Fixed CostTotal Variable CostTotal CostAverage CostAverage Fixed CostAverage Variable CostExperience Curve PricingTarget Return PricingLong-Run Target Return PricingPsychological PricingOdd-Even PricingPrice LiningDemand-Backward PricingPrestige PricingFull-Line PricingComplementary Product PricingProduct-Bundle PricingBid PricingNegotiated Price18-14Key Terms