1. Chapter 21: “Developing and Applying a Pricing Strategy ” Joel R. Evans & Barry Berman Marketing, 10e: Marketing in the 21st Century
3. A Framework for Developing and Applying a Pricing Strategy Consumers Costs Government Channel Members Competition Feedback Objectives Broad Price Policy Pricing Strategy Implementation of Pricing Strategy Price Adjustments Factors Affecting Price Decisions
9. Alternative Ways of Developing a Pricing Strategy Cost-Based Pricing Compare selling price with competitors Begin with costs and work towards selling price Begin with selling price and work to costs Demand-Based Pricing Competition-Based Pricing Cost Factors Demand Factors Pricing Strategy Competitive Factors Combination Pricing Above the Market Below the Market At the Market
12. Cost-Plus Pricing Price = Total fixed costs + Total variable costs + Projected profit Units produced Prices are set by adding a pre-determined profit to costs. It is the simplest form of cost-based pricing .
13. Markup Pricing A firm sets prices by computing the per-unit costs of producing (buying) goods and/or services and then determining the markup percentages needed to cover selling costs and profit. It is most commonly used by wholesalers and retailers. Price = Product cost (100 – Markup percent)/100 Some firms use a variable markup policy , whereby separate categories of goods and services receive different percentage markups.
14. Traditional Break-Even Analysis Total fixed costs Price - Variable costs (per unit) Break-even point (units) Break-even point (sales dollars) = These formulas are derived from the equation: Price X Quantity = Total fixed costs + (Variable costs per unit X Quantity) = Total fixed costs Price - Variable costs (per unit) Price
15. Break-Even Analysis Can Be Adjusted to Take into Account the Profit Sought Total fixed costs + Projected Profit Price - Variable costs (per unit) Break-even point (units) Break-even point (sales dollars) = = Total fixed costs + Projected Profit Price - Variable costs (per unit) Price
25. Price Bundling for a Bookcase A consumer can buy a bookcase and have it delivered, assembled, and stained for $489, or buy the bookcase for $379 and do all or or some of the other functions. The total for unbundled price is $529 . Bundled Pricing Bookcase—$489 Includes delivery, assembly, staining Unbundled Pricing Bookcase —$379 Delivery — $50 Assembly — $35 Staining — $65