Price Structure PDF

PRICE STRUCTURE  That's why this involves recognizing the specific purposes or applications for which customers “discovering in every man that which distinguishes him...

PRICE STRUCTURE  That's why this involves recognizing the specific purposes or applications for which customers “discovering in every man that which distinguishes him within each segment utilize your product offering from others is to know him.” Hermann Hesse or maybe your service offering.  knowing someone truly means understanding Prior experience with the product category what makes them unique and different from  kapag kayong customers meron na siyang prior others. So it suggests that we should look beyond experience with the product. Yung willingness niya the surface level, similarities to discover the to pay might depend doon sa ano yung prior individual qualities that define a person. experience niya. Kapag positive yung prior experience niya, meaning to say, nasatisfy yung Pricing across customer segment needs and wants niya, then the willingness to pay The challenge is that individual customers will of the customer will definitely goes up. Pero kapag value the differentiating features of products and ka naman yung prior experience ng customer, say services very differently due to the differences in their: for example, dissatisfied siya, most likely that  of course a challenging activity, especially for customer became reluctant to your product. So, entrepreneurs because customers' willingness to mahalaga din na nasasatisfy natin yung mga needs pay for the product or for the services depends on and wants ng customers natin. Because what we their capability. want, again, is to establish or to have a long-term Ability to pay relationship with our customer.  may mga customers tayo na merong mas mataas na disposable income, their ability to pay is much This can drive significant differences in the cost to serve higher as compared with those customers na mas the customers: mababa yung kanilang disposable income. So, this  timing of customer needs, will definitely has a huge effecton the buying  speed of their payments,  level of service and support they require or they patterns of our customers. need coming from the service provider or coming Subjective preferences from the company.  it is also a consideration because magkakaiba Now, in principle, more segmentation is always better. yung preferences natin as customers. Maaaring Kasi, nakakaroon tayo ng mas maraming option. And in para sa akin affordable, maaaring hindi siya affordable sa ibang customers practice, the extent of price segmentation is limited by End-use applications the ability of the seller to manage the complexity of  dito nagbavarry daw ang pricing natin depending managing across multiple segments. And therefore, it doon sa ano yung main purpose ng isang product. somehow enforced the segmentation at an acceptable Once you have your customer segments defined, cost. you need to understand how each segment uses Segmented pricing their product or services. Kasi ano ba yung nagiging  the reason for using segmented pricing as your function niya or nagiging purpose niya? strategy, it is like charging different prices for different people based on how much they value your product. ibig sabihin, nag-iiba-iba yung presyo  natin depending on their willingness at depending on the value na ibinibigay ng customer doon sa mismo product mo.  For example, A movie theater, they might charge adults more than the children because the adults are usually willing to pay more. therefore, yung mga movie theater, ang gagawin nila, magseset sila ng mas mataas na pressure dun sa adults. So it will help the theater to make more money and keep everyone happy. Now, this illustrates the concept of segmenting or segmented pricing. Setting different prices for different customer segments based on their perceived value or based on their willingness to pay.  habang dumadami yung price points na kino- A one-size-fits-all approach to pricing reduces consider natin Mas tumataas yung revenue natin the profitability and intensifies customer pricing kasi mas na ma-maximize natin Or kumbaga pressure. napapakinabangan natin yung perceived value ng  A single price for all customers, it can somehow mga customers natin, Since they are much more lead to reduced profitability. Mas bumaba ba yung willing to pay for hire why not i-maximize natin yun? kinikita o yung kikitain ng company and may somehow provide more pressure or increase the CHALLENGES THAT UNDERMINE SEGMENTED PRICING pressure to lower the price. Customers to whom you intend to charge a higher  the reason why we use segmented pricing is price have a strong incentive to undermine it. because of, we believe that if we charge different  kung mas mataas yung isinet mo na presyo, prices to different customers, we were able to customers are expecting for more coming from generate more profit or revenue for the company. your product. So, yun naman yung challenge on THE INCREMENTAL CONTRIBUTION FROM the part of the company. Dapat kung mas mataas SEGTMENTED PRICE STRUCTURE ang expectation mo, dapat mas mataas yung ma- deliver mo doon sa customer na yun. Channel intermediaries can undermine a segmented pricing strategy by buying the product intended for delivery to customers entitled to a lower price but then actually diverting it for resale to customers targeted to receive a higher price.  Yung mga grey market sale natin. Especially yung may mga para magkaroon ng mas malaking discounts.  different components varies greatly among your Three mechanisms to form a segmented price structure. customers. 1. offer configurations  strategic bundling or strategic unbundling, we are 2. price metrics, carefully choosing which components to sell 3. price fences. separately based on their value to customers and the cost to provide them. Offer configurations  bakit ba siya nag-work? Number one is because of  is that you have to offer bundles. pricing flexibility. So, mas naging flexible tayo  Segmenting by bundled offer configurations can because you can charge different prices for still be more profitable than pricing elements different components and it allow you to capture separately if different segments of customers more value from customers who need or want simply rank the importance of features differently specific features only. And somehow, it reduce cost that they would like to have in a bundled offering. by selling only the components that the customers offer configurations is that you need to offer actually need. bundles to your customers.  Kumbaga kung ano lang yung kailangan niya, yun lang yung bibilihin niya.And then, you can reduce Segment-specific bundles the cost of providing the services to those who  Bundling can also facilitate segmented pricing, don't need the full package. So, kumbaga, thus increasing profitability when different somehow, mas nagiging customized yung na-offer customer segments have different price sensitivity natin kapagka nag-unbundle tayo. And, lastly, it for a core product or service. can increase customer satisfaction because  Example: Netflix. Netflix will offer you options. customers, they can choose only what they need, Magbibigay siya ng options na kung saan which will lead to a better experience and, of magbavary yung services na makukuha mo course, potentially higher customer loyalty. So depending doon sa willingness mo to pay. those are the reasons why strategic bundling could  Ex. Canva, mga ganyan. Meron tayo yung mga free be considered by companies. na avail. Kaya lang, kapag free yun,meron syang restrictions or limited lang yung access natin. And the more na nagbabayad ka ng packages, ng mas mataas na package, mas na-explore mo yung other features na meron sila. Unbundling  we are breaking down a product or service into smaller separate components and then we are selling them individually or magkakahiwalay. So, this can be a smart way because it may increase your profit, especially when the cost of providing  magbenta kaya hindi ka magproduce o kaya naman, from the relevant range or yung maximum level of COST BEHAVIOR production mo , your fixed cost will remain it refers to how a cost changes in response to constant. changes in the level of activity or output Mixed cost have both a fixed and a variable component,  nakakatulong sa atin to, para nang sa ganun ay kagaya ng na-discuss natin dun sa previous topic. And maintindihan natin if how cost behave within a they partially change with the activity level. certain range of activity, or ito yung tinatawag  for example, utilities or utility bills with a fixed natin na relevant range. monthly charge and a variable charge based on  relevant range is the specific range of activity usage, na kagaya ng mga water bills, na meron where the assumed cost behavior pattern holds kang, kumbaga fixed na monthly charge na true. Meaning kasi, outside of this range, the cost kailangan mo siyang bayaran regardless kung behavior may change and it may affect our cost magamit mo man yung tubig o hindi. And if you go predictions and decision making. beyond doon sa nakaset na minimum, then you have to pay for that variable amount. Reaction to changes in activity Step cost remain fixed within a specific range of Variable activity but it could increase in steps when your activity Fix exceeds the certain thresholds. Mix  for example, including supervisor salaries or step equipment rental fees, kasi nagdagdag ka halimbawa ng production mo, you need more Variable costs can change directly or change directly in supervisor, so maaari kang magkaroon ng step proportion to changes in the activity levels. costs. These are considered to be the normal  Meaning to say, as your activity increases, operating range of your activity wherein the halimbawa, dinadagdagan mo or nagdadagdag ka assumed cost behavior patterns are valid. ng pinoproduce mo na product, then therefore,  outside of this range, cost behavior may change your variable cost will also increase. Kasi, you have and it may affect your cost predictions and your to buy or you have to purchase more raw materials. decision making kung outside your relevant range. You have to hire more factory workers. So, examples, it may also include increase in your Cost reaction in relation to the changes in activity. direct materials. Because, nag-i-increase yung  In variable cost, habang tumataas daw, or habang level of activity natin. nadadagdagan yung number of units na Fixed cost remain constant within a relevant range of pinaproduce natin, nyung ating variable cost ay your activity. They do not change with fluctuations in tumataas. production or sales.  In fixed cost, it remain constant. Kahit ibahin ibahin  for example, yung rent, property taxes, and yunng number of units, you have to pay for the insurance. So, nagiging fixed siya or it remain same amount or you will incur the same cost. Kasi constant regardless kung halimbawa, hindi ka nga, kinoconsider natin ito na fixed cost.  What if you goes beyond your relevant range? So, calculated by adding the fixed cost to the variable what will happen there? doon na magbabago yung cost which is determined by multiplying the cost prediction natin. Doon na yung mga time na variable cost per unit by the number of units of the magdadagdag tayo or magkakaroon tayo ng activity. additional cost or additional expenses.  total cost versus the unit cost. your variable cost increase in total as activity levels increase. This is because the cost per unit remains constant but the total cost rises as more units are produced. So, Ito yung para sa may total. Step cost is makikita natin dito na nagbabago siya kay pataas depending doon sa increase ng number of units na pinoproduce natin.  Example. Okay, From your production na 10,000, Ginawa mo siyang 15,000. Then, meaning to say, yung cost mo, okay, ay magdadagdag ka or magkakaroon ka ng additional cost na fixed because of the increase in the level of your activity. nagdagdag ka ng manpower kasi nagdagdag ka ng products na pinoproduce, yun yung tinatawag natin na step cost.  Nakakaroon ka ng additional cost kasi nag- iincrease yung number of units na pinoproduce mo.  cost predictor are activities that are consistently observed to change along with a specific cost item. Now, these activities may predict changes in the cost, don't necessarily cause the cost to change.  cost drivers are activities that have a direct cost and effect relationship on your cost. So, they directly cost the cost to change doon sa mismo cost natin. Mixed cost, lastly, it have both a fixed and variable component. They partially change with activity levels.  for example, your utility bills with a fixed monthly charge and a variable charge based on your usage or actual usage. So, the total mixed cost is INTRODUCTION TO COSTS lamesa. So kapag ginawa mo siyang 20, yung World of cost classifications variable cost mo tataas kasi yung raw materials na 1. Association with the cost object. pakikita natin that ginagamit mo ay kailangan mo magdagdag. this classification has two types, direct cost and indirect  Fixed cost this cost remain constant within a cost. specific range of your activity. If rent, say for  Direct cost, these are costs that can be easily and example, no matter how many units you produce, accurately assigned to a specific product or a the rent stays the same. So, hindi magbabago yung service. So, say for example, the cost of the wood renta mo kahit na hindi ka magproduce or used to build a table or the wages of the carpenter magproduce ka na mas marami, yung rent na who assembles it is considered to be direct cost. binabiran mo will remain constant. another example, if you are producing clothes, so  Mixed cost, they have both a fixed and a variable the raw materials which includes the fabric, the component. A good example for this is water bill. button, the zipper, the thread, those are Diba sa water bill, meron tayo yung minimum considered to be direct cost. And And the salaries payment. Regardless kung ma-reach mo siya, or or the wages of the factory workers producing or regardless kung ma-reach mo yung minimum cubic who are directly involved in producing the clothes, meter na kailangan mong bayaran, or kailangan those are considered to be direct cost. mong makonsume, babayaran mo yung minimum  Indirect cost. These are costs that can't be directly amount. traced to a specific product or service. So, think of  Step cost, this cost increase in steps as activity them as the overhead cost like rent, utilities, or the levels increase. So, say for example, you are hiring salary of the factory supervisor. Kahit nasabihin or you are going to hire an additional worker natin na they are working doon sa factory or doon because you might lead to a sudden increase in the sa planta or doon sa manufacturing site, however, labor cost. So, meaning to say, kaya ka daw if they are not performing duties directly doon sa magdadagdag or you're thinking for adding paggawa ng main product, if they are just additional worker, in result, magkakaroon ka ng providing supervision yung mga managers, increase in your labor cost. Bakit ka ngayon kinoconsider natin yun as indirect cost. And this magdadagdag ng labor, ng additional manpower cost benefit multiple products or services. we mo? Because of maybe, dahil ngayong panahon na allocate them based on different methods. so to, seasonal yung product na pinoproduce mo at marami tayo or meron tayong mga ways kung ngayong period na to ay mabenta yung product na paano natin siya i-allocate. pinoproduce mo, so you need more manpower in 2. Reaction to change. let's consider how cost behave return or in effect, magkakaroon ka ng increase as the production levels change. doon sa labor cost mo. So, yun yung tinatawag  variable cost are cost or these costs fluctuate natin na step cost. Kapag nagkakaroon tayo or directly with changes in activity levels. for example, nagbabago, yung level of activity natin ay nag-i- the cost of your raw materials will increase as your increase din siya. production increases. Iba, kung halimbawa, 3. Classification on the financial statements. So, let's nagpaproduce ka lang ng sabihin natin 10 pieces ng look at how costs are categorized on the financial statements. So, in here, we have unexpired costs. These  Because by understanding this cost classifications, are costs that haven't been used up yet and they are the businesses, even small business, they can make assets on the balance sheet like the inventory or the informed decisions about pricing, production levels, prepaid expenses. and resource allocation.  unexpired costs, ito yung mga costs na sinasabi  And it is like having a financial roadmap that will natin, hindi mo pa siya nagagamit ng lahat or ng help the businesses or the business in running it buo. Kaya, inire-reflect natin siya as your asset in smoothly. So the next time you're looking at a your balance sheet. financial statement, remember that these  expired costs these are costs that have been used classifications are very important, Not only in, or up and are recorded as expenses in your income not only for the financial aspect but also for us to statement. So, nagbabago-bago yung classification set our prices. Okay, natin depending doon sa financial statements. kapag hindi pa natin siya nagamit, napupunta siya Conversion process. change of inputs into outputs. doon sa ating balance sheet as our asset. Kapag  Meaning you have to have a process. Part of the nagamit na natin siya fully, okay, napupunta na conversion process is a process. So you have your siya as our expense doon sa ating income input, And then you have your process for you to statement. have your output.  product cost are costs directly associated with  for example you purchase raw materials or your producing a product such as direct materials, direct supplies. And then you convert it, And then once labor, and manufacturing overhead. And also, our you convert it, it will produce you your output part of our product cost ay yung which is a finished product or e-service. At itong  prime cost these are subset of our product cost conversion na to, meron kang nai-incur na cost which consists of the direct materials and the when you are converting it. Kaya meron tayo doon direct labor. sa conversion cost. Kung saan, ang conversion cost, conversion cost, another subset siya, including the dito pumapasok yung ating overhead. At yung direct labor and the manufacturing overhead. ating mga labor. Kasi sila yung nagpo-produce or  period cost these costs are expense. In the period, sila yung nagpoproduce or sila yung nagpaprocess they are incurred regardless of when the product is ng product to make it a finished good or a finished sold. Say, for example, include selling and product. administrative expenses or adding your selling and You need your overhead, electricity, water, rent, etc. administrative expenses as considered to be a Kasi without this overhead cost or expenses, hindi mo period cost. Kasi kahit na naibenta mo yung siya may koconvert. So, dito pumapasok or dito product or hindi, you will incur this cost since this nangyayari yung conversion or yung process na one is part of your operating expenses. tinatawag natin. Now, bakit ba natin ginagawa or bakit ba natin Degree of conversion. dito ay pinapakita na kapag ang kailangan intindihin itong behavior ng bawat cost natin? business mo ay nandito sa categories like department stores, gas stations, jewelry stores, travel agencies, yung degree of conversion ay mababa lang. As magkoconvertn or magpaprocess ng input mo to compared, kapag nandito sa manufacturing, have your output. Kaya ang input mo dito, your construction, agriculture, architecture, auditing, and so purchase, raw materials and then supplies, and on and so forth, na mas mataas yung degrees of then you have your conversion process, and then conversion nila. Why? It is because of mas marami din you have your output as yung iyong mga finished yung manpower or yung process na kailangan mo gawin. product bago mo siya maibenta kay customer. So, yung degree of conversion natin ay mas mataas Service company, so your input here is that you kapag nandun ka sa manufacturing or kapag purchase supplies. That is your input. your process, you kailangan mo ng mas maraming manpower or use your supplies, your labor, your overhead to provide labor doon sa operation mo. the service na ibinibenta mo kay customer.  there is a significant amount of labor needed para So, what about the cost accumulation in a nang sa ganun, maideliver mo yung service na manufacturing company? Now, let's visualize the inooffer mo kay customer. journey of a product from raw materials to the customer's hand. Paano siyang makakarating? Retail company, ang input nila, they purchase finished  So, it starts with your materials inventory. This is products and for resale. Ang magiging output nila, they where we store the raw materials like metal, fabric, have to have a warehouse na kung saan, doon yung wood, etc. As we begin to use these materials to magiging way or yun yung magiging bridge para make products, they move to work in process makabili si customer nung product mo na ibinibenta mo inventory. as retail company sa mga customer. Ex. It could be yung retaso ng damit. Nacut na pero  So, you purchase finished goods and then you hindi pa siya napagdidikit-dikit. Pero, yun ay resell it to your customers. kung titignan natin kinoconsider na natin na work in process inventory. yung degree of conversion, mababa lang yung That's why, they are partially finished. And then, once degree of conversion niya. Same with department the product is complete, it goes to finished goods stores. inventory. Once nama-assemble na natin lahat ng parts or components ng product, ilalagay na natin siya as Department stores, ang ginagawa nila is merchandising. finished goods inventory. They are purchasing yung mga damit and then they  from materials inventory, work and process display it doon sa store nila and then they sell it to the inventory, hanggang finished goods inventory, customer. So, yung degree of conversion niya ay mas lahat ng yun ay nakalagay sa ating balance sheet. mababa.  once na maibenta natin siya, once na makonvert natin siya from finished goods inventory to cost of Manufacturer. kapag ka mga manufacturing, nasa goods sold, napupunta na siya ngayon as an manufacturing industry ka, the significant amount of expense on our income statement. Because it labor and machinery is very high. represents the cost of producing the table that we  Kasi dito, kailangan mo ng maraming factory just sold. workers. Kailangan mo ng mga machines na siyang  the remaining cost, like rent, utilities, salaries, these become part of our operating expenses. So, you just have to subtract the cost of goods sold and the operating expenses from our revenue to give us our net income. So, yun yung parang basic way natin to determine yung ating net income.