Pricing products
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- Current profit maximization
- Quality leadership
- 2. Marketing mix strategy
| External factors:
*Market characteristics *Demand pattern *Competition *Other environmental factors Pricing Decisions Internal factors 1. Marketing objective: The firm’s objective determines the pricing strategy. Survival- companies troubled by too much capacity, heavy competition, or changing consumer wants set survival as their objective. A manufacturing firm can reduce production to match demand and a hotel can cut rates to create the best cash flow. Current profit maximization- many companies want to set a price that will maximize current profits, cash flow or return on investment, seeking financial outcomes rather than long-run performance. Market- share leadership-w hen companies believe that a company with the largest market share will eventually enjoy low costs and high long-run profits; they will set low opening rates and strive to be the market-share reader. Quality leadership- provides superior quality for a high price to capture the luxury market. E.g. Ritz-Carlton has: high capital investment per room; high labor cost per room (to maintain well qualified staff); high employee guest ratio to provide luxury service; charge high price for their luxury service. 2. Marketing mix strategy: price must be coordinated with product design, distribution and promotion decisions to form a consistent and effective marketing program. 3. Costs: Costs set the floor for the price a company can charge for its product. A company wants to charge a price that covers its costs for producing, distributing, and promoting the product. Beyond covering these costs, the price has to be high enough to deliver a fair rate of return to investors. Types of Costs: Costs take two forms: fixed and variable. Fixed costs (overheads) - are those that do not vary with production or sales level. Example- rent, interest, salary etc. Variable costs- vary directly with the level of production. Example- cost for inputs\raw materials. Download 23.6 Kb. Share with your friends:
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