...Ola Shaarawi Introduction Jack and Jill developed a new product in the telephonic industry and anticipate that the new product will fill in a gap in the market as it combines new features which will enable the customers to buy one product rather than two. Market research shows a positive response to the product. Jack and Jill anticipate that it will take the competitors two years to enter the market and imitate their products while the life cycle of the new product is likely to be five years. Jack and Jill needs advice on setting the price, on pricing strategies and what are the effects of the demand on the pricing levels knowing that they a limited production capacity as they cannot produce more than 500 units per month. Analysis Market research reveals that the product will be well received and thus the demand may exceed production capacity that is limited to 500 units per month. We will consider each of the following pricing strategies: - Price Skimming: This strategy involve setting high price to exploit sections of the market that are sensitive to price change (inelastic demand). Recommendation: not recommended as there are close substitutes in the market and at this stage you have not established your name in the market. - Price Penetration: This strategy involve setting a low price to penetrate the market. Recommendation: not recommended as the low price will stimulate demand on the product when the company have a limited capacity to produce. This...
Words: 801 - Pages: 4
...*Price: The amount of money charged for a product or service, or the sum of the values consumers exchange for the benefits of having or using the product or service. > Major pricing strategies *Considerations in setting price [Figure 9.1], [Figure 9.2] -Customer perceptions of value = Price ceiling (No demand above this price) Assess customer needs and value perceptions -> set target price to match customer perceived value -> determine costs that can be incurred -> design product to deliver desired value at target price -Product costs = Price floor (No profits below this price) Design a good product -> determine product costs -> set price based on cost -> convince buyers of product’s value 1. Customer value-based pricing: setting the price based on buyers’ perception of value, rather than on the seller’s cost. a. Good value pricing: offering just the right combination of quality and good service that customers want at a fair price. E.g. Mcdonald’s offer value meals and dollar menu items. Small and less expensive models in Armani car companies. b. Value-added pricing: rather than cutting prices to match competitors, marketers adopting this strategy attach value-added features and services to differentiate their offerings and this supports higher prices. 2. Cost-based pricing: setting prices based on the costs for producing, distributing and selling the product, plus a fair rate of return for its effort and risk. E.g. Woolworth, Dell (lower...
Words: 1224 - Pages: 5
...bargained hunters, students and other. Also, there is the threat of increasing competition and overcapacity in low peak periods which makes hotel room prices very flexible and volatile. Normally, a hotel’s pricing strategy would consider several factors such as competitive reaction, customer demand, company objectives, and also general market trends. Thus, there are many different pricing strategies used by hotels such as normal booking, special rates, Peak/off-peak season, airline bookings, and also group bookings. Introduction What is price? “The amount of money charged for a product or service, or the sum of the values consumers exchange for the benefits of having or using the product or service”. Marketers have to remember pricing is important because it is the only marketing mix which produces revenue while other marketing mix factors represents costs. It is also the number one problem marketing executive’s face. Companies often make mistakes in their pricing such as being too cost-oriented; prices are not changing to reflect market changes; the pricing do not take other marketing mix factors into account and others. Good companies would use a pricing structure for their products. The pricing structures reflect the changes as products move along the product life cycle. Changes in pricing happen when companies want to reflect the changing costs and demand and to account for variations in buyers and situations. Factors to...
Words: 712 - Pages: 3
...GOALS 1ST they provide guidance and unified direction for people in the organization. Goals can help everyone understand where the organization is going and why getting there is important. 2nd goal setting practices strongly affect other aspects of planning. Effective goal setting promotes good planning, and good planning facilitates future goal setting. 3rd goals can serve as a source of motivation for employees of the organization. (reward system) 4th goals provide an effective mechanism for evaluation and control; How successfully today’s goals are accomplished. (setting a high goal and half way there realizing you will not meat that goal then study why they didn’t reach their goal) KINDS OF GOALS Goals are set for and by different levels within an organization. FOUR BASIC LEVELS OF GOALS – mission, strategic, tactical and operational. Mission - a statement of an organization’s fundamental purpose Strategic goals - a goal set by and for top management of the organization Tactical goal - a goal set by and for middle managers of the organization Operational goal - a goal set by and for lower-level managers of the organization. All managers should be involved in the goal-setting process. Each manager, however, generally has responsibilities for setting goals that correspond to his or her level in the organization. The mission and...
Words: 3896 - Pages: 16
...behavior by firms. B) a homogeneous product. C) no barriers to entry. D) very few firms. Answer: C Diff: 1 Topic: Market Structures 2) Perfect competition and monopolistic competition are similar in that firms in both types of market structure will A) act as price takers. B) produce a level of output where price equals marginal cost. C) earn zero profit in the long run. D) act as price setters. Answer: C Diff: 1 Topic: Market Structures 3) Oligopoly differs from monopolistic competition in that an oligopoly includes A) product differentiation. B) barriers to entry. C) no barriers to entry. D) downward-sloping demand curves facing the firm. Answer: B Diff: 1 Topic: Market Structures 4) Regardless of market structure, all firms A) consider the actions of rivals. B) maximize profit by setting marginal revenue equal to marginal cost. C) produce a differentiated product. D) have the ability to set price. Answer: B Diff: 1 Topic: Market Structures Figure 13.1 [pic] 5) Figure 13.1 shows a payoff matrix for two firms, A and B, that must choose between a high-price strategy and a low-price strategy. For firm B, A) setting a high price is the dominant strategy. B) setting a low price is the dominant strategy. C) there is no dominant strategy. D) doing the opposite of firm A is always the best strategy. Answer: B Diff: 1 ...
Words: 5120 - Pages: 21
...Hairs in Product Positioning description After three years of development, Paramount Health and Beauty Company is preparing to launch a new technologically advanced vibrating razor called Clean Edge. The innovative new design of Clean Edge provides superior performance by stimulating the hair follicles to lift the hair from the skin, allowing for a closer shave. The company has already decided to introduce Clean Edge into the men's market where it has a strong presence. Jackson Randall, the product manager for Clean Edge, struggles with how best to position the product for the launch. One strategy is to release Clean Edge as a "niche" product, targeting the high-end market of fastidious groomers looking for superior skin care products. Another strategy is to release the product into the highly competitive mainstream razor market where the product can be positioned as the most effective razor available. Randall meets internal resistance to the mainstream strategy from the product manager for the company's current, but aging, mainstream razor products and he must consider the effects of cannibalization in his plan. Randall must recommend an optimal strategy and provide supporting economic analysis of his decision--not just for Clean Edge, but for its effect on the entire company. Learning objective: Explore issues associated with strategic product positioning. Review new product development process and understand the importance of evaluating product-company and product-market...
Words: 1285 - Pages: 6
...Information Author(s): Redman, Thomas C. Publication Date: 09/22/2008 Product Type: HBS Press Chapter Abstract: This chapter focuses on the current state of data and information quality in the typical organization. The author discusses seven common data quality issues, including poor data definition and organizational confusion. Real-life examples, such as the subprime mortgage meltdown, demonstrate the need for developing a keen eye for the roles that data play in your organization, including operations, delayed decisions, and misinformed strategies. Subjects: NO SUBJECTS(KEYWORDS) Length: 29p List Price: $6.95 BH087 Title: The 3R Framework: Improving eStrategy Across Reach, Richness, and Range Author(s): Wells, John D.; Gobeli, David H. Publication Date: 03/15/2003 Product Type: Business Horizons Article Publisher: Business Horizons/Indiana University Abstract: Identifying effective strategies for designing and implementing e-business initiatives has been a persistent challenge for both practitioners and academicians. A conceptual framework is needed for leveraging digital attributes based on three dimensions: reach, richness, and range. By defining and combining these three dimensions to create such an integrated e-business strategic framework, this article provides managers with a way to assess their current strategy, as well as a prescriptive direction for strengthening it. Subjects: Corporate strategy; Electronic commerce; Technology Length: 10p NEW SMR241 ...
Words: 4085 - Pages: 17
...still dissatisfied, because the new job is not challenging. Your workday seems extremely long and you're unhappy. When you ensure your goals are aligned with what really want in life then you will be happier in the long run. If you would have taken the time to focus on what you really wanted your job search may have taken you in a new direction. In the end, you'd be doing work you love, with more energy, and interest. You'd feel a sense of accomplishment and be happier. Never underestimate the power of effectively aligning your goal. It's the foundation for really smart goals. Objective: Setting Personal Goals that Will Spark Your Enthusiasm and Lead to Lasting Success You Want to Be With the 3% That Succeed! 97% of people do not know how to set goals that provide them with the best chance for achievement and lasting success. This is because they overlook a vital step in the goal setting process. What is this step? It's called goal congruence. This simply means your goals should be aligned (in harmony with) what you really want in life. You must really be in tune with what is important to you, your work habits, and...
Words: 4084 - Pages: 17
...Bulacan State University The Price One of the most important and complex decisions a firm has to make relates to pricing its products or services. If consumers or organizational buyers perceive a price to be too high, they may purchase competitive brands or substitute products, leading to a loss of sales and profits for the firm. If the price is too low, sales might increase, but profitability may suffer. Thus, pricing decisions must be given careful consideration when a firm is introducing a new product or planning a short or long- term price change. Price and Pricing defined Price is the money, good or service exchanged for the ownership or use of a good or service. Examples of various names of price are tuition for education, rent for use of asset, interest for use of money and fare for use of taxi or a bus ride. Pricing may be defined as those activities involved in the determination of the price at which products that will be offered for sale considering the various objectives of the firm. Demand Influences on Pricing Decisions Demand influences on pricing decisions concern primarily the nature of the target market and expected reactions of consumers to a given price or change in price. Three primary considerations are demographic factors, psychological factors and price elasticity. 1. Demographic Factors In the initial selection of the target market that a firm intends to serve, a number of demographic factors are usually considered. Demographic...
Words: 2292 - Pages: 10
...PRICE SETTING Worksheet Things to Take in Consideration When Setting Price| You should consider setting prices above your competitor’s prices if…|Yes|No|?| Your market is not sensitive to price changes.|||| Your market consists mainly of growing commercial customers.|||| Your product is an integral part of an established system.|||| Your reputation for status, service, and other positive perceptions in the market increases your products’ perceived value.|||| Your customers can easily build your price into their selling price.|||| Your product is only a tiny percentage of your customers’ total costs.|||| You should consider setting your prices just below your competition if…| Your market is very sensitive to price changes.|||| Your customers need to reorder parts or supplies.|||| Your business is small enough that a lower price will not threaten your larger competitors and start a price war.|||| You have the option of economical production runs which decrease your unit cost.|||| You have not reached full production capacity.|||| Estimating Demand| 1. Which products/services do customers shop around for?| 2. Which products/services are in greater demand even at higher prices?| 3. Are certain products/services in greater demand at one time of the year than another? If so, which? And what is the duration of the demand?| 4. Do your customers expect a certain price range?| 5. What is the balance between price and quality in your market?| The Competition| ...
Words: 397 - Pages: 2
...Chapter 2 & 3 Synopsis Developing Marketing Strategies and Plans Effective marketing initiates with a view, well-communicated strategy. It helps in defining the vision, mission and outlines the strategies to achieve the business goals. The business run in the way the marketing strategies are developed and implemented. The comprehensive marketing strategy describes the following things about an organization’s business, * It defines the organizations business along with its products and services. * It explicate the position and role of the products and services in the market world. * It helps in identifying the customer profiles. * It will justify to develop new schemes, plans and effective measures to withstand in the competitive market world. A marketing strategy sets the direction and goals for a company’s marketing which is different from marketing plan and specifies actions to implement the strategies. Basically, a strategy could be developed for the next few years while marketing plan describes actions to reach the deadlines in the present year. It usually engages the organization management in creating few powerful thoughts to spread awareness and sell its products. The following factors will help the organization in marketing investment, measures to emphasize to increase the sales, 1. Determining business goals: - When setting goals it is important to be as targeted so that an organization can measure the results against...
Words: 514 - Pages: 3
...10. Pricing decisions Factors to consider when setting prices All profit organizations and many non profit organizations must set prices on their products or services. Simply defined, price is the amount of money charged for a product or service. More broadly, price is the sum of the values consumers exchange for the benefits of having or using the product or service. A company's pricing decisions are affected both by internal company factors and by external environmental factors. These factors are shown in Figure 1. Internal factors include the company's marketing objectives, marketing mix strategy, costs, and organization. External factors include the nature of the market and demand, competition, and other environmental factors. Internal Factors Affecting Pricing Decisions Marketing Mix Strategy Price is only one of the marketing mix tools that the company uses to achieve its marketing objectives. We have coordinated our price decision with product design, distribution, and promotion decisions to form a consistent and effective marketing program. For our product the same price will be applied in different geographical areas. If a client wants to order our Lazzzerlight Product Machine from Spain or from China, there won’t be price differences. The price will remain the same no matter the country you live in. Of course, we are not responsible for the transport of our product, which means that the client must pay a transport fee according to the country...
Words: 816 - Pages: 4
...Chapter 5 Pricing strategies LEARNING OBJECTIVES After reading this chapter you will: n n appreciate the strategic significance of pricing decisions in marketing strategy understand the approaches to pricing of the economist and accountant, together with their contributions and limitations in the context of the price setting process n apply a framework to pricing decisions based around the key inputs to these decisions n understand the main pricing methods and their relative advantages and disadvantages 160 Pricing strategies INTRODUCTION The price of a company’s products and services represents the vehicle for that company to achieve its financial objectives. It is through price and volume that revenue is generated. Price equates to the financial sacrifice that the customer is willing to make to purchase the product or service desired. The important criterion of pricing is problematical to marketers. This is attributed to the uncertainty associated with pricing decisions as it is a complicated area of decision making. It is with a view to examining this problem and the ways in which it can be resolved that his chapter is framed. The pressures of today’s market environment place increasing burdens on management. It is important, therefore, that the decision maker has a framework for making pricing decisions. We start by examining the traditional economist’s view of price to illustrate both the shortcomings and potential contributions of this approach as a prelude to discussing...
Words: 13457 - Pages: 54
...an amount that is charged to a product (or services). Due to that, it may carry other names, depending on the situation or context. It may include fees, rate, rent, tax, salary etc. In setting price, marketers may adopt fixed price or dynamic price. Example of fixed price is when you buy goods at the supermarket. You can’t negotiate on the price. Dynamic price, on the other hand, is an approach whereby the price is flexible. For example, when you buy goods at pasar malam or pekan hari. You can actually bargain with the seller. Whatever approaches adopted by the marketers, they actually set the price based on one of the three factors, namely cost, customer perceived value or competitors price. Cost is considered as the price floor. If marketers set the price below, they will experience a loss. So, a sound marketers usually don’t do that unless they plan for market rollout. In fact, they commonly set the price at the cost or known as break even (balik modal), or with a profit, either using cost-plus method or target profit method. Cost-plus is the easiest method to set price. For example, if you want a profit of rm2, given the cost is rm10, you will charge the product at the price of RM12. Another method is, if you want 20% profit, you will set the price at RM12 (1.2*RM10). For break even or target profit pricing, you may choose to use break even chart. Please review text and slides for detail. When marketers use cost as the bases for setting the...
Words: 1234 - Pages: 5
...16 Pricing Strategies | Definition | 1. Cost-Based Pricing | A pricing method in which a fixed sum or a percentage of the total cost is added (as income or profit) to the cost of the product to arrive at its selling price. | 2. Product Bundling Price Strategies | An advertising ploy in which a few items are offered available to be purchased in one consolidated unit that is regularly stamped at a lessened value contrasted with the entirety of their different buy costs. Item package estimating is frequently effectively utilized by the promoting bureaus of organizations that create PC programming items, fast food suppers and digital TV associations that include assembling numerous items to make a more appealing or sparing entirety. Additionally called bundle arrangement evaluating. | 3. Competition-Based Pricing | A strategy for deciding the cost at which a specific item is sold taking into account the costs of contending items as opposed to on the expense of creation or the measure of interest from clients. Rivalry based valuing can be compelling when the normal cost of contending merchandise is discernibly not quite the same as costs recommended by generation cost or request. | 4. Every Day Low Pricing (EDLP) | It is the valuing procedure utilized by retail locations that gives low costs to the clients each and every day with no extraordinary evaluating markdown, deal, correlation shopping and so on. | 5. Penetration Pricing | A promoting procedure utilized...
Words: 1037 - Pages: 5
