PRICE.

The budget

 

Managers must contribute to the profitability of the university. The budget presents the cost of the management plan. It can include the distribution cost and different actions, such as advertising or research. The annual management budget shows the department's spending over the year. Directions may ask the managers to justify or modify the budget before approving.

 

Budgeting approaches

 

There are several approaches to setting the management budget:

 

• The affordable approach: The university forecasts revenues (predicts the amount of money it expects from sales), deducts costs, and allocates remaining funds to promotion.

• The percentage of sales approach: a percentage of current or anticipated sales is allocated to managerial actions. Typically, ten percent of net sales is spent on promotion.

• The objective-and-task approach: The university costs out the cost of reaching its managerial objectives.

• Competitive parity: competitor investment is tracked and used as a rule of thumb to set the promotion budget. The objective is to beat or match the investment of competitors.

 

Return on investment (ROI)

 

Managers are accountable for their budgets. They must demonstrate that their actions are cost-effective and not a waste of money. The management plan establishes how to measure the return on investment (ROI). Monthly, quarterly, and annual reviews of performance against budget measure projected results against actual performance. Many Universities use statistics called management metrics to quantify the performance of their managerial activities. They can include market share, advertising spend, or response rates for direct marketing.

Pricing strategies

 

• Premium pricing: use a high price where there is a substantial competitive advantage.

• Penetration pricing: the price charged for services is set artificially low to gain a market share. Once this is achieved, the price is increased.

• Economy pricing: marketing costs are kept to a minimum.

• Price skimming: we charge a high price because we have a new service type. However, the high price attracts new competitors into the market, and the price falls due to increased supply.

• Psychological pricing: the consumer responds emotionally rather than rationally.

• Captive service pricing: the university will charge a premium price where the consumer cannot choose a competitive service.

• Service bundle pricing: sellers combine several services in the same package.