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Файл:The English Language of Marketing. Учебное пособие
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Unitfive.Pricing
UNIT FIVE
PRICING
Special Terms
Equilibrium равновесие
Price control контроль за ценами
Oligopoly олигополия
Monopoly монополия
Price fixing фиксирование цены
Maximization of profits максимизация прибыли
Target return запланированная прибыль
Elastic эластичный
Boycott бойкот
Fixed cost фиксированные издержки
Break-even point точка самоокупаемости
Mark-up наценка
Turnover товарооборот
Loss leader приманка (товар, продающийся
по заниженной цене, в убыток)
Price war ценовая война
Working on the text
Read and translate the text.
Pricing
What is given in exchange for a product or service is its
price. In the process of this exchange the seller or producer and the
buyer or user agree on the price. The meeting of those who supply
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TheEnglishLanguageofMarketing
or sell with those who demand or buy is how market prices are
determined.
In any particular region at a particular time similar goods tend
to have the same market price because the costs of producing and
marketing them tend to be similar. Even before goods reach the market, buyers and sellers are generally not too far apart in their ideas of
what prices should be. They are aware of the range of prices in the
past and have a notion of what they will be in the future, based on
producers’ costs and consumers’ needs. This awareness produces a
"normal price" with little variation. This average norm is the price
toward which market prices theoretically move.
According to the law of supply and demand, formulated by
the British economist Thomas R. Malthus, for each commodity
some price must exist that will cause its supply and demand to be
equal. In other words, the willingness of buyers to buy and of sellers to sell generally reveals some price at which the two activities
intersect to create the equilibrium, or normal price. If sellers cannot
find buyers, they will cut prices. Buyers who are looking for sellers
will offer to pay higher prices. Thus any variation from the equilibrium price seems to automatically correct itself by market forces
which push toward the norm. At least, this is the theory. Speculation and price controls are inhibiting factors to this natural
process. When goods are considered in the aggregate with the
complex issues of unemployment, the international balance of
trade, and national priorities, the equilibrium will still be reached,
but in an altered, controlled form.
The effect of supply on price depends on the number and
size of the suppliers. When there are many suppliers of a standard
product, the amount offered by any one of them has little or no
effect on the market price. This condition allows for a stable, competitive market. The price is kept stable – and usually low – by the
availability of the product. In an abnormal atmosphere, such as
war or famine, prices may vary widely in spite of the number of
producers. A less-than-perfect competitive market occurs when
the number of producers is so small that the output of any one of
them can cause a change in price. This competition, or oligopoly,
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Unitfive.Pricing
allows producers to set prices higher than they could in a more
competitive market.
The producers must still contend with some competition, so
prices cannot be too high unless there is a unique feature or quality.
When a few large producers furnish the entire supply of a
given product monopoly exists. If they establish a fixed price
among themselves, they can be fined or, in extreme cases, closed
down. Even though price fixing is illegal, it is relatively easy to do
and, therefore, quite common. Where a single producer has the
entire market, the price of a product can be high. If it goes too
high, however, the noticeably large profit will encourage others to
enter the market. Monopolists often set different prices for markets
separated by distance and in those markets which are least responsive to price change. This increases profitability. However the
Robinson-Patman Act of 1936 makes any price discrimination illegal, that is selling the same goods to different buyers at different
prices. There must be "like price for like quality and quantity". The
only differences permitted must be based on cost differences or the
need to meet competition.
In some cases producers or distributors of certain goods
want to protect the retail sales of their products against price cutting. They set a price below which their product cannot be sold by
printing the price on the package or announcing the price through
advertising. Usually these measures involve well-known brands or
trademarked goods. These price maintenance procedures are regulated by law in most countries.
In the strict theory of competition, price policy has no role and
individuals do not put prices on their products. Prices are assumed to
be determined by that automatic mechanism which adjusts prices to
bring supply and demand into equilibrium. Price policy is therefore
associated with imperfect competition since marketing-conscious
producers will set prices at the lowest unit cost of the most efficient
production method to ensure the widest market.
Price, along with product, place, and promotion, are the variables that the marketing manager controls. Pricing is extremely important since it so directly affects an organization's sales and profits.
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TheEnglishLanguageofMarketing
Naturally, profit objectives will guide pricing decisions. The marketing manager has to decide whether to maximize profits or establish a
target return. A particular target might be a certain percentage return
on sales or a certain percentage return on investment or, for a small
family operation, the return might be a fixed dollar amount of profit
to cover overhead and living expenses. With any objective, the time
factor is crucial. What is an appropriate objective for the short-term
may not be for the long-term and vice-versa.
Marketers are concerned with all the factors affecting price,
in order to keep their products from faring poorly in a widely variable atmosphere. Even in service areas, such as passenger fares
and freight rates, where detailed prices are printed and distributed, influences may cause fluctuation. The marketing manager
knows that the costs of the separate elements of the marketing mix
can be recovered by proper pricing. The cost of the product itself –
the promotion and selling associated with it, the distribution expenses, and profit — are all directly related to price. Thus price
knits together the elements of the marketing mix and pays for their
respective contributions. The marketing manager must analyze and
reconcile the various elements of those variables which influence
price, and must then decide on an optimal price policy.
The most fundamental part of any marketing analysis is the
recognition of the competitive structure of the industry. Where
there are many competitors offering the same type of product,
price competition will be active. When there are great numbers of
similar offerings, products tend to lose their individuality. Then
differentiation becomes difficult, and marketers have little discretionary power to influence prices. It is in this circumstance that
marketers and merchants alike look for sales techniques. Disposing of goods at reduced prices draws attention to the specific
brand, in the hope that customers will continue to buy when prices
return to "normal."
Another key input variable in making pricing decisions is
industry demand. If the average price of a product is reduced, will
there be large, modest, or no expansion of demand? When demand increases significantly as prices are lowered, the demand is
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Unitfive.Pricing
said to be highly elastic, if demand is little affected by price, it is
said to be inelastic. This price sensitivity or insensitivity is influenced by various factors, making precise forecasting of the impact
of price changes difficult. Occasionally, consumer response occurs
after a time lag, so that elasticity of demand for a product may be
greater over a longer time period.
Certain products are important to consumers because they
are necessities, - i e. rice to the Japanese cook or gas to the taxi
driver. Where this is true, the industry demand will be insensitive;
as prices rise, consumers will be forced to pay more. On the other
hand, there are many areas which are not so important, such as an
extended vacation at the beach or a night at the opera. These less
important items may be highly sensitive to price. There have been
rare cases where consumers boycotted items in such numbers that
they forced prices down, no matter why they had risen originally.
Other factors affect industry demand and elasticity. Some
products have a derived demand, such as the need for tourist hotels
only where there are sufficient numbers of tourists to warrant them.
If the cost of zinc rises, industries which use it may substitute a plastic substance. Whenever substitute products are available, there is
danger of losing customers if prices rise too much. The income level
of the current customer is also a factor. Private planes are affordable
only by the very rich, so a price rise or dip may not affect sales as
much as a similar rise or dip in the cost of a color television set. Finally, there is the perceived saturation of need for a product. If Argentineans are already eating all the beef they want, it is unlikely
that the beef industry will stimulate demand further by lowering
the price. On the other hand, the demand for coffee in many countries seems far from satiated, and price reductions would reasonably accelerate sales.
Cost of production is one of the several inputs into the pricing decision. Marketers separate these costs into those which are
fixed and those which are variable. The data is then used to com-
pute various break-even points at various price assumptions.
Break-even calculations provide a measure of the minimum sales
required to avoid losing money. The same type of projection may
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TheEnglishLanguageofMarketing
be used to compute projected earnings at given sales levels. A particular level of profit may be built into the calculation as another
fixed cost to be recovered.
Average-cost pricing, which consists of adding a "reasonable" mark-up to the average cost of an item, is typical in business.
For the producer costs do drop steadily as the quantity produced
increases. Therefore, the "average" cost, and subsequently the
price, may vary with the quantity purchased. This is why large
scale production and distribution are potentially more profitable.
Retailers mark-up their prices enough to cover their buying
prices and overhead and make a profit at the same time, but not so
high as to prevent sales and a turnover of merchandise. In an effort
to keep goods moving and insure profits retailers must continually
decide when to cut prices, what to discount, and which items to
market as loss leaders. Ultimately, to stay in business, profits must
keep pace with sales.
Finally, marketing managers must take into account the goals,
positions, and resources of their own firms. Large companies with
large financial resources may absorb short-term losses in order to
ultimately gain a secure position, or even leadership, in the market.
Smaller firms may decide that the best pricing strategy is to stay
close to the big competition, hoping not to suffer a price war retalia-
tion. Whether the pricing policies involve active or passive roles,
short-range tactics or long-range strategy, they must ultimately become part of the total marketing mix.
How can the best prices for a company's products be established? There is no current technique available for setting prices at
an optimal level. Mathematically, it would be possible to choose
the best price for a single product if all the variable factors were
known. But that wishful thought is a contradiction in terms: variable factors, by definition, vary. The cost of raw materials and labor,
consumer demand, plus other factors are all dynamic, everchanging, and unstable. Pricing is not a one time decision.
Changes in the competitive environment, changes in a product's
cost structure, the pressures of inflation – these and many other
factors demand continuing attention to pricing.
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Unitfive.Pricing
Comprehension
Tick the correct answer (A, B or C) for 1-6 below:
1. A stable and competitive market exists when:
A. There are many suppliers of a standard product;
B. The number of producers is small;
C. There is only one producer who supplies the entire market.
2. The equilibrium price is created by:
A. The inability of sellers to find buyers;
B. A large number of potential buyers;
C. The supply that corresponds to the demand.
3. Why is price discrimination illegal?
A. It sets like price for like quality and quantity;
B. It makes people pay different price for the same product;
C. Because it wants to protect the price from reduction.
4. When do marketers start looking for new selling techniques?
A. When the demand is elastic;
B. When products lose their individuality and differentia-
tion becomes difficult;
C. When they dispose of the goods at reduced prices.
5. When is the demand said to be highly elastic?
A. When it fails to respond to price changes;
B. When demand decreases as prices are raised;
C. When consumers are forced to pay more.
6. Break-even point is calculated to show:
A. The minimum profit required not to lose money;
B. The minimum costs of production;
C. The maximum costs of production.
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TheEnglishLanguageofMarketing
Exercise 1
Vocabulary Practice
Find English equivalents in the text.
Спрос и предложение, диапазон цен, пересекаться, рассматривать в совокупности, в крайнем случае, реагирующий
на изменение цены, процедуры поддержания цен, ценовая
политика, привести в равновесие, вызывать колебания, с другой стороны, насыщение потребности, средняя стоимость.
Exercise 2
Fill in the blanks with one of the words below. Change the
form of the words where necessary.
a) Mark-up; b) inelastic; c) boycott; d) price maintenance; e)
breaks even;
f) discount; g) marketing mix; h) loss leader; i) cash cow; j) sales
revenues.
1. Technically, a ___1_____ is a profitable product or business with high market share in a low-growth market, but it is also used to mean any profitable product or business generating a
steady flow of _____2_____. 2. Price policy is usually associated
with ___3_____ competition. 3. Some producers protect their
goods from undercutting prices by ____4_____procedures. 4. All
of the contributions to the ____5_____ can be recovered by proper
pricing. 5. A ____6_____ is a product sold unprofitably in order
to attract customers who will then, it is hoped, be persuaded to
buy profitable ones. 6. A retailer who buys an item for $10 and
sells it for $15 has a 33% ____7___. 7. A ___8____ is frequently
given to quantity purchasers. 8. A firm that ____9___ neither
earns nor loses money. 9. One of the purposes of a __10______ is
to force prices down.
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Unitfive.Pricing
t
r
Grammar Revision: Complex Subjec
Complex Subject is a construction in which the infinitive is in
predicate relation to a noun in the common case or a pronoun in the
nominative case. It is usually used after a limited number of words denoting sense perception, mental activity, and some others in the Passive Voice. For mo
e info see §6 of the Grammar Reference.
Exercise 3
Find the Complex Subject in the following sentences and
translate them into Russian:
1. Prices are assumed to be determined by that automatic me-
chanism which adjusts prices to bring demand and supply
into equilibrium.
2. The demand is said to be highly elastic.
3. They are sure to start price war.
4. Any variation from equilibrium price seems to automatically
correct itself.
5. They are reported to be priced out of the market.
6. The idea of a good public image seems to be growing in im-
portance, especially for large companies.
Exercise 4
Rewrite the sentences using the Complex Subject.
1. They are certain, that he will enter their market.
2. It seems to us that the goods were not in proper condition.
3. We expect that their company will sign the contract tomor-
row.
4. The manager believes that a new price list has already been
made.
5. It turned out that some boxes were damaged.
6. They say the demand for this merchandise is inelastic.
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g p
f p
TheEnglishLanguageofMarketing
Exercise 5
Translate from Russian into English making use of the vo-
cabulary of the lesson.
1. Монополия существует, когда несколько крупных про-
изводителей полностью обеспечивают рынок данным
товаром.
2. Цены регулируются автоматически и приводят спрос и
предложение в равновесие.
3. Во время войны или голода цены могут сильно варьиро-
ваться, несмотря на число производителей.
4. Необходимо рассматривать все условия в совокупности.
5. Если у покупателя есть желание купить какой-то товар,
то он готов заплатить любую цену.
6. Точка самоокупаемости – это такая точка, на которой по-
сле уплаты всех налогов нет ни прибыли, ни убытков.
7. Маркетологам необходимо решить, максимизировать ли
прибыль или установить запланированный доход.
8. Если несколько производителей устанавливают между
собой фиксированные цены, их могут оштрафовать или
даже закрыть, т. к. это считается незаконным.
9. На этом рынке существует ощутимое насыщение по-
требности в данном товаре.
10. Розничные торговцы делают наценку, чтобы покрыть
накладные расходы и получить прибыль.
Vocabulary test
Match the words in the left column to their definitions in the
right one
1. Maximization
of profits
2. Target return
A. the state of balance due to the equal
weight of opposing forces or influences
The establishment of prices at a deter-
B.
mined level by a government or by mutual
consent amon
roducers o
roducts
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