LESSON 13
PRICING
Text
All products and all services have prices. The price depends on different thing such as.credit terms delivery, trade- inallowance, guarantees, quality and other forms of service, which price can produce the biggest profit during a long period of time. It’s hardly possible to determine such a price. The price may be too high to produce a large volume or too low to cover costs. No other area of marketing operations has been a subject to bad practice. Many businesses peruse unsound price policies for long periods of time and are not aware about it.
Prices can be determined in different ways. For example, the prices of meat, cotton and other agricultural prices can be decided in large central market where forces of supply and demand exist. This is pure price competition. The prices on industrial products (iron, steel, etc.) are usually decided by large companies. As a rule the amount and price of goods sold to large number of buyers is controlled by a few competing sellers. Prices also can be set by the government, usually for different public services – railroads, electricity, manufactured gas, bus services, etc.
If demand increases, prices rise, profits expand and new investment is attracted. But other factors may be involved as well. Prices are related to each other in different ways. Ultimately, everything is related in price, since the consumer can buy and must pay for everything out of a particular, limited amount of money.
Active Vocabulary
credit terms – кредитные условия
trade-in allowance – сумма денег, отданная за старую вещь и включенная в счет покупки новой
to cover costs – покрывать затраты
to peruse unsound price policies – вести неразумную ценообразовательную политику
supply and demand – предложение и спрос
price competition – конкуренция в ценообразовании
to set prices – устанавливать цены
Comprehension Questions
- Why is it difficult to determine the right price?
- Why is the seller interested in the price that produces the highest volume of sales at the lowest unit cost?
3.Why do many businesses follow unsound pricing policies?
- In what way are agricultural prices decided?
- How arc industrial products usually priced?
- Why does the government usually set the prices for public utility services?
- Why is it so important to know the levels of supply and demand when dealing with pricing?
- Why is everything related by price?
- It is very difficult… without sound |1 supply and
Vocabulary Practice
Exercise 1. Put ills necessary word in the sentence.
price policy. |demand
- Of course we are interested in |
producing the … with the lowest unit |2 volume of sales
costs. |
3.I decided to buy a new car at |3 trade-in
this company because they offered |allowance
the best… on my old model. |
- The … of this store are very beneficial |4 compete
for customer. |
- Their business will fail if they |5 price policies
persue unsound…. |
- The government usually … for public |6 credit terms
utility services. |
- In pure competition the forces |7 to set prices
of… operate. |
Dialogue
Dick is introducing a new line of products and is talking to his friend Tom, a business consultant, about it.
Dick It’s the first time when I’m in business for myself.
Tom Don’t worry. The store has always been doing well. It has a great location and as far as your new line of merchandise…
Dick That’s what I wanted to talk to you about. Can you give some ideas how to charge the prices?
Tom With pleasure. Generally, there an. two types of pricing policies. There is price emphasis and price deemphasis.
Dick What’s the difference?
Tom The price emphasis policy emphasizes low prices. This encourages sales. But low price doesn’t give extra services.
Dick So, a really low price means no credit, home delivery, repair, installation and other services.
Tom That’s what I mean. But many people are^ interested only in the low price and not in the extra services.
Dick Yes, and vice versa. The price which I set determines the number of sales. I must think thoroughly about it.
Tom A good example of price emphasis is “loss leader” pricing. It means that you choose one item – let’s say an electric razor – at a price just above the cost. The customers will come to your shop to buy this loss leader item. But since they are inside they can decide to buy a few other things they need.
Dick It sounds interesting. What other things can you tell?
Tom There is also off-even pricing. Let’s say you sell a tape recorder for $69.95 instead of $80.00. Though it is in fact about the same, the low price can produce a favorable psychological effect.
Dick What are the other ways to attract the customers?
Tom First of all, remember that you are going to compete with well-known products, so you should start with specially low prices. It’s important to advertise this. You should use newspaper and, maybe a radio spot, maybe do a big window and floor display.
Dick It makes sense.
Tom And you can raise the price after your customers try a new brand get to know it and like it. They will continue to buy it.
Dick I see. And what is the price de-emphasis you mentioned before?
Tom It concerns high quality expensive items. Price de-emphasis means that you don’t call attention to the price at all.
Dick I know, it concerns our fine jewelry department or designer fashions.
Tom Yes. I see you are going to do very well.
Dick Your suggestions seem to be ver useful. Don’t forget you have a discount on any shopping you do in my shop.
Tom In such a case I’ll be back tomorrow with my wife.
Active Vocabulary
location место расположения
extra services дополнительные услуги
installation services услуги по установке
to charge prices устанавливать, назначать цены
price emphasis продажа товара за счет низкой цены
price de-emphasis попытка продажи товара не за счет низкой цены, а за счет других факторов
loss-leader item товар, продаваемый по очень низкой цене, служащей для привлечения окупателей
off-even pricing цена, не доходящая до круглой цифры и стимулирующая желание покупателя купить
favorable psychological effect благоприятный психологический эффект
to start with especially
low prices начинать с особо низких цен
new brand новая марка (товара)
high quality expensive item высококачественный дорогой продукт
Vocabulary Practice
Exercise 1. Change the sentences according to the model.
Model: The tape recorder is inexpensive. Your store sells the tape recorder.
The tape recorder that your store sells is inexpensive.
- The dresses are fashionable. The store introduced the new dresses last week.
- The store has many refrigerators. Dick owns the store.
- The stereo is high-priced. My daughter wants the stereo.
- The price determines the number of sales. A retailer sets the price.
- Very often the people don’t want extra services. Many supermarkets offer extra services.
- Your shop should have loss-leader item. Loss-leader item will attract the customers.
- Price de-emphasis works with high quality expensive items. Price-de- emphasis means that you don’t call attention to the price at all.
Exercise 2. Change the sentences according to the model.
Model: We won’t introduce a new line of merchandise unless you suggest it.
We will introduce a new line of merchandise if you don’t suggest it.
- Tape recorders are popular unless the price is too high.
- The consumers will continue to buy unless they don’t like the item.
- The buyer can get installation services unless he wants to pay for it.
- The salesman will help you unless he is too busy.
- People won’t try a new product unless there is advertising.
- Customers won’t buy the new brand, unless the price is low.
- They won’t raise the price unless it is necessary.
- In what way were the prices charged in this country?
- What is your idea of the term market price?
- What type of pricing policy works with the majority of consumer goods? (price-emphasis, price de-emphasis)
- What is more preferable for you in pricing: low prices with no extra services or high prices with home delivery, repair and other services?
- Why is it .so important to have loss leader item in a shop?
- What is off-even pricing made for?
- How can your pricing policy help to compete with well known products?
- Этот магазин предоставляет покупателю выгодные кредитные условия.
- Товар имеет низкую цену. Она покроет затраты.
- Эта фирма ведет неразумную ценообразоватсльную политику.
- Прежде чем выпускать товар, необходимо тщательно изучить спрос и предложение.
- Государство устанавливает цены на ряд продуктов.
- Магазин имеет превосходное место расположения.
- Супермаркет предоставляет покупателю много дополнительных услуг: доставку товаров на дом, кредит, установку и т.д.
- Новая марка несомненно привлечет покупателей.
- Начинайте с низкой цены.
- Продажа за счет низкой цены действует при продаже товаров народного потребления.
Exercise 3. Answer the questions.
Exercise 4. Translate into English.
Exercise 5. Set your imagination free.
You are a journalist and you are to interview the minister of finance about! the pricing policy in this country. What questions would you ask him?
Grammar Exercises
Exercise 1. Make sentences interrogative and negative.
Mode 1: They can change your credit terms at once. Can they change your credit terms at once? They can’t change your credit terms.
- They must research supply and demand before they start to produce the new item.
- The company has to cover the costs by all means.
- The middlemen may set the new price.
- They can persue unsound price policies.
- They must choose another location for their shop.
- Off-even pricing … undoubtedly produce favorable psychological effect on a consumer.
- I spoke with the chief. Now you… change the credit terms.
- They are very talented specialists. 1 think they … design the new line very quickly.
- The situation has changed, so we … start with specially Sow prices.
- We … choose price emphasis policy for this item.