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  • Pricing For Profit Pricing For Profit: Chapter 10: Pricing and Credit 1

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    Zubair A Khan
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    Chap10 Pricing for Profit by Zubair A Khan.

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    Chap10 Pricing for Profit

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    Chap10 Pricing for Profit by Zubair A Khan.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPT, PDF, TXT or read online from Scribd
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    Download as ppt, pdf, or txt
    35 views15 pages

    Pricing For Profit Pricing For Profit: Chapter 10: Pricing and Credit 1

    Uploaded by

    Zubair A Khan
    Chap10 Pricing for Profit by Zubair A Khan.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPT, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    Download as ppt, pdf, or txt
    of 15

    Pricing

    Pricing for
    for Profit
    Profit

    Chapter 10: Pricing and Credit Copyright 2003 Prentice Hall Publishing Company 1
    Factors Affecting Price

     Product or service costs  Business location


     Market factors  Seasonal fluctuations
     Sales volume  Psychological factors
     Competitors’ prices  Credit terms and
     Company’s competitive purchase discounts
    advantage  Customers’ price
     Economic conditions sensitivity
     Desired image

    Chapter 10: Pricing and Credit Copyright 2003 Prentice Hall Publishing Company 2
    What determines price?
    Price Ceiling ("What will the market bear?")

    ? ? ?
    Final
    FinalPrice
    Price(What
    (Whatis
    isthe
    the
    Acceptable company's
    company'sdesired
    desired"image?")
    "image?")
    ?
    Price
    ?
    Range ? ?
    ?
    ? ?
    ? ?
    Price Floor ("What are the company's costs?")
    Introducing a New Product

    Three Goals:
     Get the product accepted
     Maintain market share as competition
    grows
     Earn a profit

    Chapter 10: Pricing and Credit Copyright 2003 Prentice Hall Publishing Company 4
    Introducing a New Product

    Three Strategies:
     Penetration
     Skimming
     Sliding down the demand curve

    Chapter 10: Pricing and Credit Copyright 2003 Prentice Hall Publishing Company 5
    Pricing Established Goods
    and Services
     Odd pricing
     Price lining
     Leader pricing
     Geographic pricing
     Zone pricing
     Uniform delivered
    pricing
     F.O.B factory

    Chapter 10: Pricing and Credit Copyright 2003 Prentice Hall Publishing Company 6
    Pricing Established Goods
    and Services
     Opportunistic pricing
     Discounts
     Multiple pricing
     Bundling
     Suggested retail prices

    Chapter 10: Pricing and Credit Copyright 2003 Prentice Hall Publishing Company 7
    Two Pricing Forces: Image and
    Competition
     Price conveys image.
     Prices send signals to customers about
    quality and value
     When setting prices, business owners
    must consider competitors’ prices.
     Competitors’ locations
     Nature of the competing goods

    Chapter 10: Pricing and Credit Copyright 2003 Prentice Hall Publishing Company 8
    Pricing for Retailers:
    Markup
    Dollar Markup = Retail Price - Cost of Merchandise
    Dollar Markup
    Percentage (of Retail Price) Markup = Retail Price

    Percentage (of Cost) Markup = Dollar Markup


    Cost of Unit

    Chapter 10: Pricing and Credit Copyright 2003 Prentice Hall Publishing Company 9
    Pricing for Retailers:
    Markup
    Dollar Markup = Retail Price - Cost of Merchandise
    Dollar Markup
    Percentage (of Retail Price) Markup = Retail Price

    Percentage (of Cost) Markup = Dollar Markup


    Cost of Unit
    Example:
    Dollar Markup = $25 - $15 = $10
    $10
    Percentage (of Retail Price) Markup = = 40%
    $25
    $10 = 67%
    Percentage (of Cost) Markup =
    $15
    Chapter 10: Pricing and Credit Copyright 2003 Prentice Hall Publishing Company 10
    Pricing for Manufacturers:
    Breakeven Selling Price
    Total
    Breakeven { Variable cost Quantity } fixed
    Selling Profit + { per unit x produced } + costs
    =
    Price Quantity produced

    Chapter 10: Pricing and Credit Copyright 2003 Prentice Hall Publishing Company 11
    Pricing for Manufacturers:
    Breakeven Selling Price
    Total
    Breakeven { Variable cost Quantity } fixed
    Selling Profit + { per unit x produced } + costs
    =
    Price Quantity produced

    Example:

    Breakeven
    Selling
    = $0 + { 6.98/unit x 50,000 unit } + $110,000
    Price 50,000 units
    = $9.18 per unit

    Chapter 10: Pricing and Credit Copyright 2003 Prentice Hall Publishing Company 12
    Pricing for Service Firms:
    Price per Hour

    Price per Hour = Total cost per x 1


    productive hour (1 - net profit target as
    a % of sales)

    Chapter 10: Pricing and Credit Copyright 2003 Prentice Hall Publishing Company 13
    Pricing for Service Firms:
    Price per Hour

    Price per Hour = Total cost per x 1


    productive hour (1 - net profit target as
    a % of sales)

    Example: Ned’s TV Repair Shop

    Price per Hour = $13.44 per x 1 = $16.38 per hour


    hour (1 -.18)

    Chapter 10: Pricing and Credit Copyright 2003 Prentice Hall Publishing Company 14
    Consumer Credit

     Credit cards
     National
     Private
     Installment credit
     Trade credit

    Chapter 10: Pricing and Credit Copyright 2003 Prentice Hall Publishing Company 15

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