Paying large dividends reduces risk and thus influence stock price Gordon, and is a proxy for the future earnings Baskin, Volatility is the rate of change in the price of a security over a given time period and, consequently, the greater the volatility the greater the risk of substantial gain or loss. Likewise, many investors prefer stocks that support more predictable earnings and therefore carry less risk.
Pricing is an important strategic issue because it is related to product positioning. Furthermore, pricing affects other marketing mix elements such as product features, channel decisions, and promotion. While there is no single recipe to determine pricing, the following is a general sequence of steps that might be followed for developing the pricing of a new product: Develop marketing strategy - perform marketing analysis, segmentation, targeting, and positioning.
Make marketing mix decisions - define the product, distribution, and promotional tactics. Estimate the demand curve - understand how quantity demanded varies with price. Calculate cost - include fixed and variable costs associated with the product.
Understand environmental factors - evaluate likely competitor actions, understand legal constraints, etc. Set pricing objectives - for example, profit maximization, revenue maximization, or price stabilization status quo.
Determine pricing - using information collected in the above steps, select a pricing method, develop the pricing structure, and define discounts.
These steps are interrelated and are not necessarily performed in the above order. Nonetheless, the above list serves to present a starting framework. Marketing Strategy and the Marketing Mix Before the product is developed, the marketing strategy is formulated, including target market selection and product positioning.
There usually is a tradeoff between product quality and price, so price is an important variable in positioning. Because of inherent tradeoffs between marketing mix elements, pricing will depend on other product, distribution, and promotion decisions.
Estimate the Demand Curve Because there is a relationship between price and quantity demanded, it is important to understand the impact of pricing on sales by estimating the demand curve for the product. For existing products, experiments can be performed at prices above and below the current price in order to determine the price elasticity of demand.
Inelastic demand indicates that price increases might be feasible. Calculate Costs If the firm has decided to launch the product, there likely is at least a basic understanding of the costs involved, otherwise, there might be no profit to be made.
The unit cost of the product sets the lower limit of what the firm might charge, and determines the profit margin at higher prices. The total unit cost of a producing a product is composed of the variable cost of producing each additional unit and fixed costs that are incurred regardless of the quantity produced.
The pricing policy should consider both types of costs. Environmental Factors Pricing must take into account the competitive and legal environment in which the company operates.
From a competitive standpoint, the firm must consider the implications of its pricing on the pricing decisions of competitors. For example, setting the price too low may risk a price war that may not be in the best interest of either side. Setting the price too high may attract a large number of competitors who want to share in the profits.
From a legal standpoint, a firm is not free to price its products at any level it chooses. For example, there may be price controls that prohibit pricing a product too high.
Pricing it too low may be considered predatory pricing or "dumping" in the case of international trade. Offering a different price for different consumers may violate laws against price discrimination. Finally, collusion with competitors to fix prices at an agreed level is illegal in many countries.
Pricing Objectives The firm's pricing objectives must be identified in order to determine the optimal pricing. Common objectives include the following: Current profit maximization - seeks to maximize current profit, taking into account revenue and costs.
Current profit maximization may not be the best objective if it results in lower long-term profits.Share prices' influence on firm value and low price history reflects that the stock prices board in bangladesh?
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