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MARKETING Concepts as applied in the Ateneo MBA
Nathania Marija T. VilloncoAteneo Graduate School of Business
May 10, 2013
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OutlineMaster 6 Steps in Setting Price
1. Select the price objective2. Determine demand3. Estimate costs4. Analyze competitor price mix5. Select pricing method6. Select final price
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Step 1: Selecting the Pricing Objective
Survival
Concept 1
Maximum current profit, market share,
market skimming
Product-quality leadership
Survival among competitors 1st Example of Concept 1
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• Jollibee prices objective to remain competitive
Maximum Current Profit2nd Example of Concept 1
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• companies with weak competition set a high price that produces the most cash flow
Php 169.00 Php 180.00 Php 245.00
Maximum Market Share3rd Example of Concept 1
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• Increase in market share so as to reap the benefit of large-scale production.
Market Share
Maximum Market Skimming4th Example of Concept 1
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• company sets a higher price to capture those customers who are willing to pay more for a product.
Php 75.00 Php 25.00
Product Quality Leadership5th Example of Concept 1
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• company aims to provide the best quality product in the market, and therefore charges more than its competitors.
Php 140.00 Php 98.00 Php 62.00
Step 2: Determining Demand
Price
Concept 2
Price Elasticity of Demand
Estimating Demand Curves
Price
• Price reduced compared to competitors to enter into markets or increase sales.
1st Example of Concept 2
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Estimating Demand Curves
• relationship between the price of a certain commodity and the amount of it that consumers are willing and able to purchase at that given price.
2nd Example of Concept 2
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Price Elasticity of Demand
• fast food is extremely price elastic, the slightest change can affect sales significantly
3rd Example of Concept 2
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Step 3: Estimating Costs
Type of Costs
Concept 3
Activity-Based Cost Accounting
Accumulated Production
Target Costing
Type of Costs
• Fixed – rent, utilities
• Variable – inventory
1st Example of Concept 3
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Accumulated Production
• refers to the gain a company experiences in producing a product over a period of time. Workers learn shortcuts, materials flow more smoothly, and procurement costs fall
2nd Example of Concept 3
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Activity Based Accounting
• Identifies the costs of producing items or services.
o Maintenance of the restaurant building.o Refrigeration of new materials.o Cardboard boxes for food order.o Store manager's salary.o Wages of the employees who clear and clean tables.o Depreciation on equipment.o Oil for the deep fat fryer (change every 4 hrs. )
3rd Example of Concept 3
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Target Costing
• Final cost is determined after market analysis, and the product is designed or redesigned to meet it
4th Example of Concept 3
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Step 4: Analyze competitor price mixConcept 4
Analyze competitor price mixExample of Concept 4
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Step 5: Selecting a Pricing MethodConcept 5
• Markup• Target-return• Perceived-value• Value• Going-rate• Auction-type
Selecting a Pricing Method• Markup
• Target Return
• Perceived Value
1st Example of Concept 5
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Cost: US$ 0.08Price: US$ 1.08Markup: 1,250%
Investment$10,000
Expected sales volume1,000 units
Profit$10,000
sales volume1,000 units
Selecting a Pricing Method• Value
• Going rate
• Auction type
2nd Example of Concept 5
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Php 28.00 Php 25.00
Step 6: Selecting the Final PriceConcept 6
Impact of other marketing activities
Company Pricing policies
Gain-and-risk sharing pricing
Impact of price on other parties
Selecting the Final Price• Impact of other marketing activities
• Company pricing policies“Think global, act local”
1st Example of Concept 6
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Selecting the Final Price
• Gain and risk sharing price
• Impact of price on other parties
2nd Example of Concept 6
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1. Select the price objective2. Determine demand3. Estimate costs4. Analyze competitor price mix5. Select pricing method6. Select final price
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SummaryMaster 6 Steps in Setting Price
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REMEMBER This!
Mastering Marketing Concepts through Stories, Images and Diagrams
Nathania Marija T. VilloncoAteneo Graduata School of Business
May 10, 2013
www.nathaniavillonco.blogspot.com
1.) Geographical 2.) Discounts/Allowances3.) Promotional 4.) Differentiated
Price-adaptation Strategies
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Imagine you need to buy grocery for the nearby supermarket
You have to buy the following…..
• Since Campbelle’s is imported from the U.S. price is affected geographically to cover shipping and other expenses
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• Special offer for apples, provide larger packs with a discounted price
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Php 25.00/each
Php 80.00/packPack of 4 pieces
Vs.
• Seasonal promotions during holidays such as Halloween give additional discounts
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• Different customer groups are charged different prices for the same product, students are often charged lower.
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You have to buy the following…..
Price-adaptation Strategies
MARKETING Concepts as applied in the Ateneo MBA
Nathania Marija T. VilloncoAteneo Graduate School of Business
May 10, 2013
www.nathaniavillonco.blogspot.com