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Lesson Objectives
1. To understand why 'price' is so important to business
2. To begin to understand the different factors that will determine the price of a product
3. To begin to be able to calculate prices on the basis of costs
Price (One of the 4 P's)
To Start ... a Quiz ... can you work as a team
2 teams of 4 and 1 team of 3
Coca-ColaiPad 2 X-Box 360Game
Philips 3D TV
MiniScooter
The Price is Right
$499$??? $0.50 $199 $49 $999
Total:
$499$??? $499$???$499$??? $499$???
$1746.50$499$???
Which team will get the closest to the market price?
You have 1 minute, each product, and 1 minute to add (the prices) to work out the Total market price?
Which jeans would you choose to buy?
George Jeans Levis Jeans$9.99 $80.00Click 1 Click 1Click 2 Click 2
Click 3 Click 3
OR
OR
You thought that Levis are better quality than George?
A Consumer study in 2007 found that George jeans were better than Levis jeans in all three of their quality inspections tests. The results showed that:
· George jeans were more durable than Levis
· George jeans were less likely to shrink than Levis after washing
· George jeans kept their original appearance for a longer period of time than Levis
....think again!
The Cost of Producing One Pair of Nike Sports Shoes and
the Sale Price & Profit
Promotion Costs Sales and Advertising
$16.00
Total Cost of Production & Promotion $30.75
Sale price to shop $
Profit to Nike (or contribution to profit) per pair)
$
Sale price to Consumer (you or me) $
Profit to Shop (or contribution to profit) per pair)
$
Think how many pairs do Nike make and sell
Think how many pairs does the Shop buy and sell
Production Costs
Labour Costs $2.75
Materials $9.00
Rent/ Equipment $3.00
Total Cost of Production $14.75
Original Lesson Objectives
1. To understand why 'price' is so important to business
2. To begin to understand the different factors that will determine the price of a product
3. To begin to be able to calculate prices on the basis of costs
What have we LEARNT?
All other considerations being equal ... The Price has to be Right?
(We call this method of pricing ..... "Cost Plus")
AND NEXTContinue our project work on the Computers
BUT to re-cap: So far you should have:
· Started to format your project (inserting Title page etc) to add to as your work progresses
· Decided what type of business you will operate.· Decided where you are likely to have your "Retail" outlet (shop)
· Started preparing your surveys (primary & secondary)
· Be thinking about the Prices (your Costs) you will have to pay and you will charge for your Products or Services (these can be confirmed, checked or modified by your survey)
I also have a pricing example to help you plan your costs and selling prices
·It is based on pricing a meal in a restaraunt
·but similar method used for Nike and other products or services
From the information above you can see
NOTE - Profit is the profit per person / event served but if the total sum of these profits is not enough to cover all other costs (e.g. rent) you will make a loss
We learn more about this in finance
$
$
$
I am having a party!
I am having a party and intend to invite 100 guests.
I now need to find a company to cater the event.
I will decide on Price & Service
You are each a catering company and you will compete with each other to attempt to win the contract for this event.
What you need to do...
In order to win this contract you will need to complete a number of tasks
1. Choose the items for the Menu from the ´Menu Costs´ sheet and complete the 'Pricing Sheet' to provide a final price for your services
2. Draw up a Menu for the event (Do not include prices)
3. Write a promotional speech that you will then use to try and convince me that your company offers the best value for money
Things to consider:
1. In order for this contract to be worthwhile for your business, you will want to make sure that your final price covers all of your costs and provides you with a good profit
2. You have competition so make sure that your price is not too high
3. The customer may be willing to pay a higher price if you can convince them that your higher quality means they will get good value for money
Menu Food Item Quantity Cost of food
Main Course
Side Dish 1
Side Dish 2
Additional Costs Quantity Cost
Cost of energy
Cost of Staff
Total Menu Cost Main Course(s) + Side Dishs
Cost of Transport (if not included)
Total Additional Costs (Wine + Staff + Transport)
Total Cost (Total Menu Costs + Total Additional Costs)
Profit Margin (add your own percentage to total cost)
Tax (add 20% to the sum of your total cost and profit margin)
Price per person (Cost + profit + tax / Number of guests)