Scribd
Upload
24 views2 pages

Chap 4 Pricing

The document discusses the importance of pricing in the marketing mix, emphasizing that pricing decisions significantly impact profitability. It outlines the types of costs involved in product pricing, including unit variable costs and fixed costs, and presents two main pricing strategies: price skimming and penetration pricing. The choice of pricing strategy is influenced by the company's objectives, such as maximizing revenue, market share, profit, or survival.

Uploaded by

Osaisem Manguira
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
24 views2 pages

Chap 4 Pricing

The document discusses the importance of pricing in the marketing mix, emphasizing that pricing decisions significantly impact profitability. It outlines the types of costs involved in product pricing, including unit variable costs and fixed costs, and presents two main pricing strategies: price skimming and penetration pricing. The choice of pricing strategy is influenced by the company's objectives, such as maximizing revenue, market share, profit, or survival.

Uploaded by

Osaisem Manguira
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
You are on page 1/ 2

DEVELOPING THE MARKETING MIX PRICE

- The price that the marketer charges for a product or service is a vital
decision that has far reaching consequences. From the point of the business,
products and services are offered with the intention of making a profit.

Product Cost Estimation

-Before determining the price of a product or service, the total cost of


production must be computed.

Types of cost

1. Unit Variable Cost

2. Unit share of operating and other expenses (fixed cost)

1.Unit Variable Cost

-Refers to how much it would cost to manufacture one unit of the product.

-This includes the cost of direct materials, direct labor, and direct overhead.

2.Unit share of fixed cost

-Fixed costs are expenses incurred by the organization that are not related to
the manufacture of the product.

-This include executive and staff salaries, office rental, advertising and
promotions, professional fe and other similar expenses.

-When new products are introduced into the market, one of the two following
pricing strategies can be used:

1. Price Skimming

-Where the product’s selling price is way above its unit cost.

Weakness

-It makes the market very attractive for would-be competitors because of the
appeal of large price markups.

2. Penetration Pricing

-A pricing strategy where the new product is priced only marginally above its
unit cost.
Objective

-To capture a large part of the market at an early stage by making the
product affordable to the greatest number of people.

Advantage

-It can discourage would-be competitors from entering the market because of
low price markup.

Disadvantage

-It can prolong the recovery period for research and development,
advertising, and promotion costs.

Pricing Strategy Selection

- The choice of pricing strategy depends almost exclusively on a company’s


objectives.

PRICING OBJECTIVE PRICING STRATEGY


Maximum Revenue -Penetration Pricing
-Marginal pricing
-Going rate pricing
-Promotional Pricing
Maximum Market Share -Penetration Pricing
-Marginal pricing
-Going rate pricing
-Promotional pricing
Maximum Profit -Price Skimming
-Prestige Pricing
Survival -Marginal Pricing

You might also like