MOS Notes - Feb 1.docx

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Management and Organizational Studies
Management and Organizational Studies 1021A/B
James O' Brien

MOSTextbook Notes Chapter 9PricingNature and Importance of Price What Is a PriceFrom a marketing viewpoint price is the money or other considerations including other goods and services exchanged for the ownership or use of a product o The practice of exchanging goods and services for other goods and services rather than for money is called barterFinal priceList priceIncentivesAllowancesExtra feesPrice as an Indicator of ValueValue is the ratio of perceived benefits to price oro ValuePerceived benefits Price o This relationship shows that for a given price as perceived benefits increase value increasesValue pricing is the practice of increasing a products benefits while maintaining or decreasing pricePrice in the Marketing MixPrice has a direct effect on a firms profits This is apparent from a firms profit equation o ProfitTotal RevenueTotal CostPrice influences quantity sold Quantity sold influences costs efficiency of productionGeneral Pricing Approaches There are four common approaches to helping find an approximate price level to use as a reasonable starting pointDemandOriented ApproachesDemandoriented approaches emphasize factors underlying expected customer tastes and preferences more than such factors as cost profit and competition when selecting a price levelSkimming PricingA firm introducing a new product can use skimming pricing setting the highest initial price that those customers really desiring the product are willing to payPenetration PricingSetting a low initial price on a new product to appeal immediately to the mass market the exact opposite of skimming pricing
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