Factors Affecting Pricing Decisions

1. Factors Affecting Pricing Decisions

2. Define Selling Price The amount a seller charges for a good or service; usually thought of as the dollar figure shown on the price tag of products or quoted as the price of services

3. Examples of selling prices… 1. Dues for an organization’s membership 2. Automobile insurance premium 3. Toll for driving on certain roads 4. College tuition 5. Bus or taxi fare 6. Fee for legal advice or medical attention 7. Salaries of professional athletes

4. Discuss characteristics associated with selling prices. • 1. They can’t be pulled out of thin air. (Each business must carefully determine and adjust selling prices.) • 2. They change. (Example: Gasoline prices fluctuate with the price of crude oil.)

5. Businesses keep only a portion of what they make……… • 1. Businesses have to pay all the costs associated with the products they sell. • 2. They have to pay their operating expenses (e.g., utilities, salaries, lease/rent, etc.).

6. The Importance of Selling Price • 1. Businesses and customers use selling price as a way to compare products when making buying decisions. • 2. Businesses and customers use selling price as a way to decide how to allocate their money (i.e., since they can’t buy everything they want, they look at selling price to decide which items they can afford). • 3. Businesses use selling price to determine the amount of income from sales they’ll receive (i.e., businesses determine how much markup they’ll apply to the cost of products to pay current expenses and to provide for the business’s future growth.)

7. Pricing objectives and marketing objectives must be compatible. Businesses need to set their marketing objectives first, and then determine the pricing objectives that will most likely help them achieve the marketing objectives. As marketing objectives change, pricing objectives will need to be reviewed and possibly changed.

8. Primary categories of pricing objectives. • 1. Sales-oriented objectives: -Are focused on increasing total income from sales and can be accomplished in two ways: a. Charge low prices to increase the volume of sales so that the business has more total income because it sells more products b. Charge high prices to increase the dollar value of each sale

9. Objectives (cont.) • 2. Profit-oriented objectives -Are focused on creating profit for a business a. Some businesses set prices that result in the greatest amount of profit. b. Other businesses set prices to recover their costs and earn a reasonable profit.

10. How does Marketing affect our society? 1. Makes our lives better. 2. Promotes using the earth’s resources more wisely. 3. Encourages trade between nations.

11. Describe ways in which consumers and businesses would be affected if marketing did not exist. 1. Without marketing, our nation would have difficulty linking producers with customers. 2. Without marketing, our own routines would be different because marketing shapes even the little things we do.