FP7-KBBE. 2013.2.3-02 Network for the transfer of knowledge on traditional foods to SMEs. Coordinator: Institute of
Technology Tralee, Tralee, Co Kerry, Ireland.
Funded by the EC (Grant No: 613776). www.tradeitnetwork.eu
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“The task of setting a price is one of the most important
decisions in determining the marketing mix”.
To a buyer, price is the value placed on what is exchanged.
Buying power depends on income, credit and wealth.
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FP7-KBBE. 2013.2.3-02 Network for the transfer of knowledge on traditional foods to SMEs. Coordinator: Institute of Technology Tralee, Tralee, Co Kerry,
Ireland. Funded by the EC (Grant No: 613776). www.tradeitnetwork.eu
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Financial price - the basis of market exchanges; the quantified
value of what is exchanged.
Price is expressed in many different forms e.g. premium, fine,
fee, fare, toll, rent, commission, deposit, tip, interest, taxes.
Price is a key element in the marketing mix because it relates
directly to the generation of total revenue.
Profits = total revenues - total costs.
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FP7-KBBE. 2013.2.3-02 Network for the transfer of knowledge on traditional foods to SMEs. Coordinator: Institute of Technology Tralee, Tralee, Co Kerry,
Ireland. Funded by the EC (Grant No: 613776). www.tradeitnetwork.eu
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Price has a psychological impact on
customers and marketers can use it
symbolically.
Price competition - a policy whereby a
marketer emphasises price as an issue and
matches or beats the prices of
competitors.
Non-price competition - a policy in which
a seller elects not to focus on price but to
emphasise other factors instead.
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FP7-KBBE. 2013.2.3-02 Network for the transfer of knowledge on traditional foods to SMEs. Coordinator: Institute of Technology Tralee, Tralee, Co Kerry,
Ireland. Funded by the EC (Grant No: 613776). www.tradeitnetwork.eu
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Pricing objectives are overall goals that describe what a
company wants to achieve through its pricing efforts.
They include:
Survival.
Profit.
Market share.
Cash flow.
Status quo.
Product quality.
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FP7-KBBE. 2013.2.3-02 Network for the transfer of knowledge on traditional foods to SMEs. Coordinator: Institute of Technology Tralee, Tralee, Co Kerry,
Ireland. Funded by the EC (Grant No: 613776). www.tradeitnetwork.eu
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1. Selection of Pricing Objectives.
2. Assessment of target market’s evaluation of price and its
ability to buy.
3. Determination of demand.
4. Analysis of demand, cost and profit relationships.
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FP7-KBBE. 2013.2.3-02 Network for the transfer of knowledge on traditional foods to SMEs. Coordinator: Institute of Technology Tralee, Tralee, Co Kerry,
Ireland. Funded by the EC (Grant No: 613776). www.tradeitnetwork.eu
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5. Evaluation of competitors’ prices.
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6. Selection of a pricing policy.
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7. Development of a pricing method.
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8. Determination of a specific price.
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FP7-KBBE. 2013.2.3-02 Network for the transfer of knowledge on traditional foods to SMEs. Coordinator: Institute of Technology Tralee, Tralee, Co Kerry,
Ireland. Funded by the EC (Grant No: 613776). www.tradeitnetwork.eu
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Pricing objectives must be explicitly stated because they form
the basis for decisions about other stages of pricing.
They must be consistent with the company’s overall
objectives.
Pricing objectives may be long term or short term, and may
change over time.
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FP7-KBBE. 2013.2.3-02 Network for the transfer of knowledge on traditional foods to SMEs. Coordinator: Institute of Technology Tralee, Tralee, Co Kerry,
Ireland. Funded by the EC (Grant No: 613776). www.tradeitnetwork.eu
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The importance of price depends on
the type of product, the type of target
market and the purchase situation.
The marketer then knows how much
emphasis to put on price.
FP7-KBBE. 2013.2.3-02 Network for the transfer of knowledge on traditional foods to SMEs. Coordinator: Institute of Technology Tralee, Tralee, Co Kerry,
Ireland. Funded by the EC (Grant No: 613776). www.tradeitnetwork.eu
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Marketing research and forecasting techniques yield estimates
of sales potential.
These estimates help establish the relationship between a
product’s price and the quantity demanded.
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FP7-KBBE. 2013.2.3-02 Network for the transfer of knowledge on traditional foods to SMEs. Coordinator: Institute of Technology Tralee, Tralee, Co Kerry,
Ireland. Funded by the EC (Grant No: 613776). www.tradeitnetwork.eu
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The Demand Curve is a graph of the
quantity of products expected to be sold at
various prices, if other factors remain
constant.
For most products, the quantity demanded
goes up as the price goes down, and vice
versa.
Changes in buyers’ needs, variations in the
effectiveness of other marketing mix
variables, the presence of substitutes and
environmental factors influence demand.
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FP7-KBBE. 2013.2.3-02 Network for the transfer of knowledge on traditional foods to SMEs. Coordinator: Institute of Technology Tralee, Tralee, Co Kerry,
Ireland. Funded by the EC (Grant No: 613776). www.tradeitnetwork.eu
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The Price Elasticity of Demand is a
measure of the sensitivity of demand to
changes in price.
If the demand is Elastic, a small increase in
price will result in a large decrease in the
quantity demanded.
If the demand is Inelastic, even a large
increase in price will result in only a small
drop in the quantity demanded e.g.
necessities such as ESB.
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FP7-KBBE. 2013.2.3-02 Network for the transfer of knowledge on traditional foods to SMEs. Coordinator: Institute of Technology Tralee, Tralee, Co Kerry,
Ireland. Funded by the EC (Grant No: 613776). www.tradeitnetwork.eu
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There are two approaches to understanding demand, cost and
profit relationships:
1. Marginal analysis and
2. Break even analysis.
Marginal analysis is the examination of what happens to a
company’s cost and revenues when production (or sales
volume) is changed by one unit.
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FP7-KBBE. 2013.2.3-02 Network for the transfer of knowledge on traditional foods to SMEs. Coordinator: Institute of Technology Tralee, Tralee, Co Kerry,
Ireland. Funded by the EC (Grant No: 613776). www.tradeitnetwork.eu
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Fixed costs do not vary with changes in the
number of units produced or sold.
The average fixed costs declines as the
output increases.
Variable costs vary directly with changes in
the number of units produced or sold.
They are usually constant per unit.
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FP7-KBBE. 2013.2.3-02 Network for the transfer of knowledge on traditional foods to SMEs. Coordinator: Institute of Technology Tralee, Tralee, Co Kerry,
Ireland. Funded by the EC (Grant No: 613776). www.tradeitnetwork.eu
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Marginal revenue is the change in total
revenue that occurs when a company sells
an additional unit of a product.
As the demand curve slopes down,
companies must lower their price in order
to sell more products.
This means that each additional unit sold
provides the business with less revenue
than the previous unit sold.
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FP7-KBBE. 2013.2.3-02 Network for the transfer of knowledge on traditional foods to SMEs. Coordinator: Institute of Technology Tralee, Tralee, Co Kerry,
Ireland. Funded by the EC (Grant No: 613776). www.tradeitnetwork.eu
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Break even point is the point at which the
cost of producing a product equals the
revenue made from selling the product.
Knowing the number of units necessary to
break even is important in setting the
price.
Fixed Costs
Price - Variable costs.
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FP7-KBBE. 2013.2.3-02 Network for the transfer of knowledge on traditional foods to SMEs. Coordinator: Institute of Technology Tralee, Tralee, Co Kerry,
Ireland. Funded by the EC (Grant No: 613776). www.tradeitnetwork.eu
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Learning competitors’ prices may be a regular function of
marketing research.
It may be difficult to get this information.
Companies may be emphasising price, or they may be
emphasising other parts of the marketing mix.
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FP7-KBBE. 2013.2.3-02 Network for the transfer of knowledge on traditional foods to SMEs. Coordinator: Institute of Technology Tralee, Tralee, Co Kerry,
Ireland. Funded by the EC (Grant No: 613776). www.tradeitnetwork.eu
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A Pricing Policy is a guiding philosophy or course of action
designed to influence and determine pricing decisions.
Pioneer pricing - the setting of a base price for a new product.
Price Skimming is charging the highest possible price that
buyers who most desire the product will pay.
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FP7-KBBE. 2013.2.3-02 Network for the transfer of knowledge on traditional foods to SMEs. Coordinator: Institute of Technology Tralee, Tralee, Co Kerry,
Ireland. Funded by the EC (Grant No: 613776). www.tradeitnetwork.eu
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Penetration pricing is setting a price below
the prices of competing brands in order to
penetrate a market and produce a larger
unit sales volume.
Psychological pricing encourages
purchases that are based on emotional
rather than rational responses.
Odd-Even pricing is a pricing method that
tries to influence buyers’ perceptions of
the price or product by ending the price
with certain numbers.
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FP7-KBBE. 2013.2.3-02 Network for the transfer of knowledge on traditional foods to SMEs. Coordinator: Institute of Technology Tralee, Tralee, Co Kerry,
Ireland. Funded by the EC (Grant No: 613776). www.tradeitnetwork.eu
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The pricing method structures the
calculation of the actual price.
Cost oriented pricing is a pricing method
whereby a monetary amount or percentage
is added to the cost of a product. It
includes cost plus and mark-up pricing.
It does not necessarily take into account
supply and demand.
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FP7-KBBE. 2013.2.3-02 Network for the transfer of knowledge on traditional foods to SMEs. Coordinator: Institute of Technology Tralee, Tralee, Co Kerry,
Ireland. Funded by the EC (Grant No: 613776). www.tradeitnetwork.eu
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Demand oriented pricing is a pricing
method based on the level of demand for a
product, resulting in a high price when
demand is strong and a low price when
demand is weak.
Price differentiation is a pricing method
used when a company wants to use more
than one price in the marketing of a
specific product.
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FP7-KBBE. 2013.2.3-02 Network for the transfer of knowledge on traditional foods to SMEs. Coordinator: Institute of Technology Tralee, Tralee, Co Kerry,
Ireland. Funded by the EC (Grant No: 613776). www.tradeitnetwork.eu
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Competition oriented pricing is where a
business considers costs and revenue to
be secondary to competitors’ prices.
Marketing Oriented Pricing is where a
company takes into account a wide range
of factors including marketing strategy,
competition, value to the customer, pricequality relationships, costs and other such
factors.
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FP7-KBBE. 2013.2.3-02 Network for the transfer of knowledge on traditional foods to SMEs. Coordinator: Institute of Technology Tralee, Tralee, Co Kerry,
Ireland. Funded by the EC (Grant No: 613776). www.tradeitnetwork.eu
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Pricing policies and methods should direct and structure the
selection of a final price.
A systematic approach to pricing is suggested, although in
practice, prices are often finalised after only limited planning.
Pricing remains a flexible and convenient way to adjust the
marketing mix.
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FP7-KBBE. 2013.2.3-02 Network for the transfer of knowledge on traditional foods to SMEs. Coordinator: Institute of Technology Tralee, Tralee, Co Kerry,
Ireland. Funded by the EC (Grant No: 613776). www.tradeitnetwork.eu