Transcript Chapter 19 - Pricing Concepts

Chapter Nineteen
Introduction to Pricing Concepts
Objectives
Define & discuss price
Describe price interaction with the other “Ps”
Analyze price’s role of in the economy
Outline pricing strategy fundamentals
Review relationship between price and
organizational objectives
Relate demand to price
Overview demand & cost considerations on pricing
Differentiate price elasticity, inelasticity, and crosselasticity
Key Pricing Concepts
Value:
product’s power to
stimulate exchange
Barter:
Money-less exchange
Other terms:
Rent
Fee
Donation
Toll
Honorarium
Tuition
Price in the Marketing Mix
Pays for all of a firm’s List price = basic price
activities
quote
Most flexible element Mark down = price
in marketing mix in
reduction
free economy
Consumer
Major impact on store
image
Price & Competition
Price only competition:
Long distance telephone
Internet service providers
Commodities
Nonprice competition:
competition emphasizing marketing variables
other than price
Positioning
Differentiation
Branding
Demand Curve
Relationship between price and demand
$5,500
$5,000
$4,500
$4,000
$3,500
$3,000
$2,500
8,000
13,000
18,000
Demand
23,000
28,000
Supply Curve
Relationship between price and supply
$5,500
Supply
$5,000
$4,500
$4,000
$3,500
$3,000
$2,500
8,000
13,000
18,000
Demand
23,000
28,000
Equilibrium Price
Supply = Demand = $4,000
$5,500
Supply
$5,000
$4,500
$4,000
$3,500
$3,000
$2,500
8,000
13,000
18,000
Demand
23,000
28,000
Pricing Strategy
Set pricing objectives
Establish importance of price to target market
Know demand
d
Understand costs
s
Determine strategy
Relating Pricing to Other
Marketing Objectives
Company
objectives
Product objectives
Marketing
objectives
Distribution objectives
Promotion objectives
Pricing
strategies
and
policies
Price objectives
Actual
prices
Pricing Objectives:
Income-Oriented
ROI
Profit maximization
Cash flow
Survival
Pricing Objectives
Sales oriented
Competition oriented
Market share
Sales growth
Avoid
Meet
Undercut
Stabilize prices
Pricing Objectives:
Social Concerns
Behave ethically
Maintain employment
Public education
“Give back to the
community”
Target Market
Considerations
Who
Price sensitivity
Price perception
Willingness to pay
Relative Price Inelasticity
Price
P1
A relatively large increase
in price results in only a
small decrease in demand
P2
D
Q1 Q2
Quantity
Relative Price Elasticity
Price
A relatively small
decrease in price results
in substantial increase in
demand
P1
P2
D
Q1
Q2
Quantity
Total Price Elasticity
Price
D
P1
P2
Q1,Q2
Quantity
Total Price Inelasticity
Price
P
D
Quantity
Cross-Elasticity
Relationship in elasticities between products
Computer demand increase  printer demand
increase
Beef prices increase, decreasing demand  fish
demand increase
Know Your Costs
Average
cost
Marginal
cost
Total
cost
Types of Costs
Price
Marginal cost
Average cost
Demand
Marginal revenue
Quantity
Intersection of Marginal Cost
and Marginal Revenue
Cost and revenue
MR
Marginal cost =
marginal revenue
Cost less
than revenue
MC
Cost greater
than revenue
Units produced and sold
Review
Define & discuss price
Describe price interaction with the other “Ps”
Analyze price’s role of in the economy
Outline pricing strategy fundamentals
Review relationship between price and
organizational objectives
Relate demand to price
Overview demand & cost considerations on pricing
Differentiate price elasticity, inelasticity, and crosselasticity