1. PRICING PRODUCTS UNERSTANING AND CAPTURING CUSTOMER VALUE CHAPTER NO. 10

3. Factors to Consider When Setting Prices Customer perceptions of value Other internal and external considerations Marketing strategy, objective and mix. Nature of the market and demand Competitors strategies and prices Product cost Price floor No profits below this price

6. Value-Based Pricing versus Cost-Based Pricing Product Cost Price Value Customers Customers value Price Cost Product Cost-Based Pricing Value-Based Pricing

11. COST PER UNIT AT DIFFERERNT VELS OF PRODUCTION PER PERIOD 10 100 1000 Cost per unit 1 2 3

13. 10 20 30 1000 2000 3000 Accumulated production Cost per unit LEARNING CURVE

14. COST BASED PRICING Cost-plus Pricing Adding a standard mark up to the cost of the product.

15. EXAMPLE Suppose Variable cost = 10 Fixed cost = 3,00,000 Expected unit sales = 50,000 Unit cost = variable cost + Fixed cost Unit sales Unit cost = 10 + 300000 50000 = 16 Mark up price = Unit cost 1 – desired return on sales = 16 1 – 0.2 = 20

17. Example Break even volume = Fixed cost Price – variable cost = 300000 20 – 10 = 30,000 units Total cost = fixed cost + variable cost

18. 600 800 1000 10 20 30 40 50 Sales volume in units (Thousands) Cost in Rupees (Thousands) Total revenue Target profit Total Cost 200 400 30 40 50 20 30 40 50 10 20 30 40 50

25. price p 2 P 1 P’ 2 P’ 1 Quantity demanded per period Quantity demanded per period A. Inelastic B. Elastic Q 2 Q 1 Q’ 2 Q’ 1

26. FORMULA Price elasticity of demand = - % change in quantity demand %change in price