PricePrice: the value of money placed on a good or service

Forms of price: –fees to dentist–$ for new shoes–taxi fairs–Rent–dues for DECA–tuition

Importance of PriceHelps establish an image, competitive edge or profits– Walmart– lowes

Customer’s judge products based upon price–Ford Focus $8,000–Cadillac Escalade $50,000

Importance of PriceFlexibility – can be changed

much more quickly than other marketing decisions

(design, package, location)

Pricing ObjectivesMaximize ProfitMaximize SalesMeet the competitionAchieve a ROI

Maximize ProfitGoal: Make $$$Charge highest price

possible–Done when you have monopoly on itemsBall Park

Maximize SalesGoal: Most CustomersCharge the Lowest price

possibleDone with NEW products

–Mountain Dew LIVEWIRE2/$1.00

Meeting the CompetitionFollow the leader in priceCalculate price and adjust

accordingly–Gas stations

How do you compete without price competition?–Quality, uniqueness, convenience

Setting Prices

Return on InvestmentDetermines relative

profitability of a product– __Profit__ investmentMany companies price products to achieve a certain return on investmentConvenience – 30% Retail 15%Gasoline 6-10%

ROI-Return On InvestmentPROFIT (Sales – Expenses)

Investment

#9 .35-.25 = ___

.25 = . Or ___%

#13Dolls… Sales 18,000 x75=1,350,000

1,350,000-1,245,500 = ___________

1,245,500

= . _____ or _______%

Beverage ProjectWith Partner, start on page 3How is it different….Features/BenefitsIdeal shape of containers

–Bottle

–Carrying case

Olympic Winners

Source: Thomson Reuters

NIKE (NKE)Sponsors top Olympic athletes, including Apolo Ohno% change since Olympics started

+2.6%

GENERAL ELECTRIC (GE)Supplies games with generators and medical equipment% change since Olympics started

+2.6%

MCDONALD’S (MCD)Sells its food in the athlete’s village% change since Olympics started

+2.0%

COCA-COLA (KO)The longest continuous corporate Olympic sponsor% change since Olympics started

+1.6%

VISA (V)“The only card accepted” at the Olympic Games% change since Olympics started

+1.6%

Olympic sponsors pay millions to showcase brands during the Games. But do those sponsorships help raise stock prices? Suprisingly, yes. The Dow Jones Summer/Winter Games Index, which tracks 36 sponsors and suppliers, has risen 36% since the start of 2009, compared to the S&P 500’s gain of 18.9% in the same period. That’s a medal-worthy performance, indeed.

•Nike

•25 Billion Dollar Company

•+2% = 500,000,000

• Is it worth 10 million to be a sponsor of the Olympics?

•ROI of %

•=5000%

Pricing TechniquesCustomers often feel price is

a reflection of quality.Only

$19.99On Sale for $700

Pricing TechniquesPsychological Pricing –

creates an illusion that appeals to particular market segments–7 Methods

Discount Pricing – offering reductions from the usual price–5 Methods

Psychological PricingOdd- Even Pricing -.99, 2.99, 11.95Prestige pricingMultiple-Unit PricingBundle PricingPromotional Pricing - Loss leader,

SaleEveryday Low PricesPrice Lining

Discount PricingCash DiscountsQuantity DiscountsTrade DiscountsSeasonal DiscountsPromotional Discounts

Case Study

Setting prices for T-Shirts

Pricing Assignment- Odd - Even

Prestige

Multiple unit

Bundle Pricing

Promo Pricing…loss leader

EDLP

Price Lining

Bait and Switch Advertising

Offering a low price on a product that you don't intend on selling and switching a customer to a more expensive product.

Pricing Laws–Sherman Antitrust act outlaws monopolies--Collusion-Company must have been proven to have been in contact with each other. (of 1890 -.) (example)

–Clayton Act-Outlaws Price Fixing -competitors agree on certain price ranges within which they set their own prices.

– Can the NFL limit production of team apparel?

–example

Robinson-Patman ActDefines price discrimination and states that it creates unfair competition.

Price discrimination- when a firm charges different prices to similar customers in similar situations.

Price Advertising lawsFTC developed guidelinesSale - A company can not

advertise a price reduction unless the original price was offered to the public on a regular basis.

May not say they have lower prices than competition without specific proof.

Break Even Tells a business the number of units

needed to sell to start making a profit. If I buy 72 Sweatshirts at $22 each. I

sell them for $30 each. How many do I need to sell to break even?

Total amount of Cost + Expenses

Selling Price

Break Even A firm expects to sell 10,000 widgets at

$10 each. The cost of manufacturing and marketing them is $7.50 each. Calculate the break even point for the widgets.

Costs + Expenses Selling Price / Unit7.5x10,000 / $10 = 7,500

What does this mean for the manufacturer?

Mark up PricingMark Up- the amount of

profit desired by a business.Cost + Markup = PriceI buy Pop Tarts for $.60

each. I want to make $.40 each. What is my SP? MU?

REVIEW Get a piece of Paper out!

1. Last year we sold $13,000 worth of product in April. This year we setting a goal to increase sales by 13 percent. What are our planned sales for April?

Review-Pricing2. What is Mutiple Unit Pricing

a) Item a,b,c,d all for $20

b) Item a sells for $10, b for $20 and c for $30

c) If you buy 3 items for $15

d) Items a is $10

Review-Pricing3. What is Odd Unit Pricing

a) Item a,b,c,d all for $20

b) Item a sells for $10, b for $20 and c for $30

c) If you buy 3 items for $15

d) Items a is $9.99

Review - BE4. I purchase 100 Dolls. They cost me

$24 each and I anticipate selling them for $36 each. How many do I need to sell to break even?

Mark up5. If a swim suit costs the store

$13.50 and the retailer has mark up of $11.75 how much is the Retail Price.

Review…ROI6. Jim and Jeni decide to sell

lemonade to make some extra money. It costs them $.17 per glass to make lemonade. They decide to sell the lemonade for $.75 a cup. What is their ROI…(return on investment).

ANSWERS1. 146902. C3. D4. 675. 25.256. 341%