6/03/2017 1 BUS106 Marketing Principles Marketing Mix: Price Lecture 5 Copyright Notice COPYRIGHT COMMONWEALTH OF AUSTRALIA Copyright Regulations 1969 WARNING This material has been reproduced and communicated to you by or onbehalf of  KaplanHigher Education pursuant to PartVB of the Copyright Act 1968 (theAct).  Thematerial in thiscommunication maybesubject to copyright under the Act. Any  further reproduction orcommunication of this material by you may be the subject of  copyrightprotection under the Act. Do not remove this notice This Topic’s Big Idea “Price can relate to anything that you perceive as having a value, not just money” 6/03/2017 2 Learning Objectives 1. Discuss the importance of pricing decisions to the economy and organisation 2. Demonstrate how the product life cycle, competition, distribution and promotion strategies, customer demands, the internet and extranets and perceptions of quality can affect price 3. Identify the legal and ethical constraints on pricing decisions 4. Explain how discounts, geographic pricing and other special pricing tactics can be used to finetune the base price The Importance in Price • Price is that which is given up in an exchange to acquire a good or service • Revenue = Unit price x number of units sold • Revenue pays for every activity • What is left over is profit • Marketers must select a price that – is not too high or low – equals the perceived value to target consumers Profit-oriented pricing objectives 6/03/2017 3 The demand determinant of price Elasticity of demand Equilibrium price for gourmet biscuits 6/03/2017 4 Factors that affect elasticity The cost determinant of price Loss-leader pricing: companies set prices below cost to attract consumers into their stores Variable costs: varies with changes in the level of output Fixed cost: doesn’t change as output is increased or decreased Mark-up pricing: the cost of buying the product from the producer, for expenses not otherwise accounted for, plus amounts of profit Other determinants of price • Stages in the product life cycle • The competition • Distribution strategy • The impact of the electronic environment • Promotion strategy • Demands of large customers • The relationship of price to quality 6/03/2017 5 Factors that affect pricing Watch Me: https://www.youtube.com/watch?v=RtUKuO 0cSoQ Steps in setting the right price on a product Price strategies: price skimming 6/03/2017 6 Price strategies: price anchoring Price strategies: penetration pricing The legality and ethics of setting a price in Australia Competition and Consumer Act 2010 protects the consumer and helps companies understand their responsibilities in dealing the consumer. Price fixing: agreement between organisations on the price they will charge for a product Price discrimination: in certain circumstances acceptable Predatory pricing: charging a very low price to drive competitors out of business or the market 6/03/2017 7 Unfair Trade Watch Me: https://www.youtube.com/watch?v=tfNqBP900L8&index=97&list=PLcn P8uT1FzoXfKYE-8VWEO5L-cyiFnQat Warning: recommended for mature audience only. May include drug reference, adult language, sex reference, cultural humor. Nurofen Migraine Pain, digital image, viewed 6th of July, 2015, http://www.johnvenes.co.uk/nurofen-migraine-tablets-6x12-s.html Price Fixing Petrol Pricing Watch Me: https://www.youtube.com/watch?v=ZjgyaVS 6ukg Price Discrimination Watch Me: https://www.youtube.com/watch?v=WjTxv0lehGk Warning: recommended for mature audience only. May include drug reference, adult language, sex reference, cultural humor. ABC News, Subeta Vimalajah Facebook photo, digital image, viewed 7th of July 2015, http://www.abc.net.au/news/2015-06-08/480-million-lostover-10-years-if-tampon-tax-axed/6529674 6/03/2017 8 Discounts, allowances, rebates and value pricing Discounts, allowances, rebates and value pricing Discounts, allowances, rebates and value pricing 6/03/2017 9 Value-based pricing A price that is set at a level that the customers perceive to be a good price compared to the price of other options Geographic pricing Geographic pricing 6/03/2017 10 Special pricing tactics Special pricing tactics Special pricing tactics 6/03/2017 11 Next Week Study Week Please bring along your Assessment 2 (Part A) draft, and any other questions that you may have about the course so far.