The pricing policy
MARKETING
Session III: Pricing Policy
Question I: Why is pricing policy so important in the marketing mix of a product ? What is pricing? Pricing is the process of determining what a compagny will receive in Exchange for its products. Pricing strategy is important for several aspects in the compagny wich are:
Survival : short-term objectives are set in order to survive
Profit :the objective is to maximise profits
Return on investment : prices are set to attain a specified return on the compagny’s investment.
Cash flow : prices may be reduced to generate cash and cover a temporary crisis
Status quo : if the competitive threat is weak there may be the no incentive to adjust set prices.
Product Quality : may be reflected in the prices charged.
Source: Oxford Lerning Lab
Question II: Explain the different way to fix a price.
There are several methods to set the price of a product wich are:
Psychological pricing method: adjusting pricing by considering the customer’s perception of your price figuring like positioning or popular price points …
Break-even pricing method: the firm tries to determine the price at which break-even point will be or making the target profit it is seeking.
Cost plus margin pricing method: the firm determines the price by calculating the costs for any given product (fixed plus variable) then adds a margin to it.
Price of the market minus costs method: the firm determines the price of its product by substracting the costs of said product to its market price, to calculate its margin.
Sources :
Question III: Explain the breakeven point and its utility.
The break-even point is the amount of sales for a given price wich generate as much revenue as costs (profit=0). Its utility is simply to know how high the sales must be to cover costs.
The break-even analysis is a financial tool that allows a manager to estimate how many units of a product a company needs to sell in order to break even, assuming a given
Session III: Pricing Policy
Question I: Why is pricing policy so important in the marketing mix of a product ? What is pricing? Pricing is the process of determining what a compagny will receive in Exchange for its products. Pricing strategy is important for several aspects in the compagny wich are:
Survival : short-term objectives are set in order to survive
Profit :the objective is to maximise profits
Return on investment : prices are set to attain a specified return on the compagny’s investment.
Cash flow : prices may be reduced to generate cash and cover a temporary crisis
Status quo : if the competitive threat is weak there may be the no incentive to adjust set prices.
Product Quality : may be reflected in the prices charged.
Source: Oxford Lerning Lab
Question II: Explain the different way to fix a price.
There are several methods to set the price of a product wich are:
Psychological pricing method: adjusting pricing by considering the customer’s perception of your price figuring like positioning or popular price points …
Break-even pricing method: the firm tries to determine the price at which break-even point will be or making the target profit it is seeking.
Cost plus margin pricing method: the firm determines the price by calculating the costs for any given product (fixed plus variable) then adds a margin to it.
Price of the market minus costs method: the firm determines the price of its product by substracting the costs of said product to its market price, to calculate its margin.
Sources :
Question III: Explain the breakeven point and its utility.
The break-even point is the amount of sales for a given price wich generate as much revenue as costs (profit=0). Its utility is simply to know how high the sales must be to cover costs.
The break-even analysis is a financial tool that allows a manager to estimate how many units of a product a company needs to sell in order to break even, assuming a given