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MSU - MKT 3013 - Exam 3 Study Guide (Chapter 9) - Study Guide

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MSU - MKT 3013 - Exam 3 Study Guide (Chapter 9) - Study Guide

School: Mississippi State University
Department: OTHER
Course: Principles of Marketing
Professor: Melissa Moore
Term: Spring 2017
Tags:
Name: Exam 3 Study Guide (Chapter 9)
Description: This study guide is for the third exam on Friday, April 7th. This is only chapter 9 because the materials for chapter 10 and chapter 11 have not yet been posted at this time. I will post them later this week before Friday!
Uploaded: 03/31/2017
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background image Exam 3 Study Guide Chapter 9 In class, Trader Joe’s was the company we discussed in an article that gave us an example of customer-driven pricing.
The right price impacts the bottom line.
Small% improvement in the price can generate large% increase in profitability. Narrow definition of price: the amount of money charged for a product or a service. Broad definition of price: the sum of all the values that customers give up to gain the benefits of having or using a product or service. Considerations in Setting Price Competition and other Consumer Perceptions Product Costs external factors   of Value Price floor:   Competitors’ strategies and prices Price Ceiling: No profits below Marketing strategy, objectives and mix   No demand above this price   Nature of the market and demand this price $ ß-------------------------------------------------------------------------------------------------------------à $$ Price Three Type of Costs: 1)  Fixed costs (overhead) – costs that do not vary with production or sales level Ex: bills or rent, heat, interest and executive salaries regardless of the company’s level of output 2)  Variable costs – vary directly with the level of production 3)  Total costs – sum of the fixed and variable costs for any given level of production Management wants to charge a price that will at least cover the total production costs at a given level of production. Cost-based pricing – involves setting prices based on the costs of producing, distributing, and selling the products plus a fair rate of return for the company’s effort and risk
Design a à Determine à Set price based à Convince buyers of good product product costs   on cost product’s value Types of Cost-Based Pricing: 1)  Cost-plus pricing (markup pricing) – adding a standard markup to the cost of the product 2)  Break-even pricing (target return pricing) – setting price to break even on the costs of making and marketing a product, or setting price to make a target return
background image Exam 3 Study Guide Look at the chart above. At the break-even points, here 600,000 units, total revenue equals total cost. To make a target return of $1 million, the company must sell 800,000 units. If it costs the company more than its competitors to produce and sell a similar product, the company will need to charge a higher price or make less profit, putting it at a competitive disadvantage. Competition-based pricing – involves setting prices based on competitors’ strategies, costs, prices, and market offerings. Consumers will base their judgments of a product’s value on the prices that competitors charge for similar products. Customer value-based pricing – uses buyers’ perceptions of value as the key to pricing. It means that the marketer cannot design a product and marketing program and then set the price.
Price is considered along with all other marketing mix variables before the marketing program
is set. Value-Based Pricing Assess customer Set target price to Determine costs Design product needs and value à match customer à that can be à to deliver desired perceptions   perceived value incurred   value at target price Two Types of Value-Based Pricing: 1)  Good-value pricing – offering the right combination of quality and good service at a fair price 0 1 2 3 4 5 6 7 200 400 600 800 Do lla rt s ( m ill io ns ) Sales Volume in Units (thousands) Break-Even Chart for Determining Target Return Price and Break-Even Volume Total Revenue Total Cost Fixed Cost

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School: Mississippi State University
Department: OTHER
Course: Principles of Marketing
Professor: Melissa Moore
Term: Spring 2017
Tags:
Name: Exam 3 Study Guide (Chapter 9)
Description: This study guide is for the third exam on Friday, April 7th. This is only chapter 9 because the materials for chapter 10 and chapter 11 have not yet been posted at this time. I will post them later this week before Friday!
Uploaded: 03/31/2017
6 Pages 59 Views 47 Unlocks
  • Better Grades Guarantee
  • 24/7 Homework help
  • Notes, Study Guides, Flashcards + More!
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