Transcript Pricing Products: Pricing Considerations and Strategies

10-1
Chapter 10
Pricing Considerations
and Approaches
Factors to Consider When Setting
Prices
10-2
Price is the Amount of Money Charged for a Product or
Service.
Internal Factors
Pricing
Decisions
External Factors
Internal Factors Affecting Pricing
Decisions
Marketing
Objectives
Marketing-Mix
Strategy
Costs
Organizational
Considerations
10-3
External Factors Affecting Pricing
Decisions
Market and
Demand
Competitors’ Costs,
Prices, and Offers
Other External Factors
Economic Conditions
Reseller Needs
Government Actions
Social Concerns
10-4
Market and Demand Factors that
Affect Pricing Decisions
Pure Competition
Monopolistic Competition
Many Buyers and Sellers Who
Have Little Effect on the Price.
Many Buyers and Sellers Who
Trade Over a Range of Prices.
Pricing in Different Types of Markets
Oligopolistic Competition
Few Sellers Who Are Sensitive to Each
Other’s Pricing/ Marketing Strategies
Pure Monopoly
Single Seller
10-5
Price Elasticity of Demand
10-6
Price
A. Inelastic Demand Demand Hardly Changes With
a Small Change in Price.
P2
P1
Price
Q2 Q1
Quantity Demanded per Period
B. Elastic Demand Demand Changes Greatly With
a Small Change in Price.
P’2
P’1
Q2
Q1
Quantity Demanded per Period
What is Cost-Plus Pricing and Why
is it Popular?
10-7
Adding a Standard Markup to the Cost of the Product.
Sellers Are More
Certain About
Costs Than
Demand
Perceived
Fairness to
Both Buyers
and Sellers
Minimizes
Price
Competition
10-8
Breakeven Analysis or Target Profit
Pricing
Cost in Dollars (millions)
Tries to Determine the Price at Which a Firm Will
Break Even or Make a Target Profit
Total Revenue
Target Profit
($2 million)
12
10
8
6
4
2
0
Total Cost
Fixed Cost
200
400
600
800
Sales Volume in Units (thousands)
1,000
Cost-Based Vs. Value-Based Pricing
Cost-Based Pricing
10-9
Value-Based Pricing
Product
Customer
Cost
Value
Price
Price
Value
Cost
Customers
Product