Price Planning

Price Planning

Chapter 25.1
Price Planning Considerations

What’s Price?
Price is the value in money placed in a good or service. It is usually expressed in monetary terms.

Relationship of aproduct value
Value is a matter of anticipate satisfaction-if consumers believe they will gain a great deal of satisfaction from a product, they will place a high value on it. They will also be willingto pay a high price.

Various forms of price
Price is involved in every marketing exchange. For example: the rent (the monthly price of an apartment), interest is the price of a loan, tuition is theprice you pay for education.

Importance of price
Price is an important factor in the success or failure of a business. It helps establish and maintain a firm’s image, competitive edge, and profits.A higher price means better quality.

Goals of pricing
* Gaining market share
* Meeting the competition

Earning a profit
Return on investment is a calculation that is used to determine therelative profitability of a product. The formula is: rate of return = Profit/investment

Gaining Market Share
Market share is a firm’s percentage of the total sales volume generated by allcompetitors in a given market.
Marketers are also interested in their market position, is the relative standing a competitor has in a given market in comparison to its competitors.

Improving market share andmarket position
Pricing is one means of improving market share and market position. Other means of accomplishing the same goals may involve increased advertising expenditures, changes in productdesign, and new distribution outlets.

Meeting the competition
They either follow the industry leader or calculate the average price and then position their product close to that figure.

Chapter25.2
Factors Involved in Price Planning

Market factors affecting prices
Four key market factors that must be considered when reviewing and establishing prices are: cost and expenses, supply and...