We think you have liked this presentation. If you wish to download it, please recommend it to your friends in any social system. Share buttons are a little bit lower. Thank you!
Presentation is loading. Please wait.
Published byKiana Frampton
Modified over 2 years ago
Copyright © 2010 by Nelson Education Ltd. Chapter 17 Price Concepts with Duane Weaver
Copyright © 2010 Nelson Education Ltd Outline 1.Price & the Law 2.Pricing Objectives 3.Profitability Objectives 4.Volume Objectives 5.Meeting Competition Objectives 6.Prestige Objectives 7.Determining Price 8.Elasticity and Pricing 9.Breakeven Analysis 10.Yield Management 11.Global Issues
Copyright © 2010 Nelson Education Ltd Pricing and the Law Price The exchange value of a good or service Competition Act Federal legislation prohibiting price discrimination, price fixing, bid rigging, predatory pricing, false or misleading ordinary selling price representations, and other anti-competitive practices
Copyright © 2010 Nelson Education Ltd Pricing Objectives
Copyright © 2010 Nelson Education Ltd Profitability Objectives Consumers must be convinced they are receiving good value for their money Intense competition results from competition for leadership position Basic formula for profit and revenue: Profit = Revenue Expenses Total Revenue = Price X Quantity Sold
Copyright © 2010 Nelson Education Ltd The PIMS Studies The Profit Impact of Market Strategies (PIMS) Project Research that discovered a strong positive relationship between a firms market share and product quality and its return on investment Firms with market share more than 40 percent have average return on investment of 32 percent Explanation: Firms with large shares accumulate operating experience and lower overall costs relative to competitors with smaller market shares
Copyright © 2010 Nelson Education Ltd Meeting Competition Objectives Firms sometimes set prices to match industry leaders Shifts marketing mix to focus on non-price factors Example: Some airlines focus competition on factors such as service and comfort Value pricing Pricing strategy emphasizing the benefits derived from a product in comparison to the price and quality levels of competing offerings Typically works best for relatively low-priced goods and services Challenge is convincing customers that low-priced brands offer quality comparable to that of higher- priced product
Copyright © 2010 Nelson Education Ltd Prestige Objectives Prestige objectives Establishing a relatively high price to develop and maintain an image of quality and exclusiveness that appeals to status-conscious consumers Example: Tiffany jewellery
Copyright © 2010 Nelson Education Ltd Methods for Determining Prices Prices traditionally determined in two basic ways: 1.Supply and demand 2.Cost-oriented analysis Customary prices Traditional prices that consumers expect to pay for a good or service Companies try to balance consumer pricing expectations with the realities of rising costs
Copyright © 2010 Nelson Education Ltd Cost and Revenue Curves Products total cost = Total variable cost + total fixed cost Variable costs change with the level of production Include raw materials and labour costs Fixed costs remain stable at any production level within a certain range Include lease payments or insurance costs Average total cost = (variable + fixed costs) / no. of units produced Marginal cost Change in total cost that results from producing one additional unit of output
Copyright © 2010 Nelson Education Ltd Price Determination using Marginal Analysis Price that brings the highest profit
Copyright © 2010 Nelson Education Ltd The Concept of Elasticity in Pricing Strategy Elasticity Measure of responsiveness of purchasers and suppliers to changes in price Elasticity of demand Percentage change in the quantity of a good or service demanded divided by the percentage change in its price Elasticity of supply Percentage change in the quantity of a good or service supplied divided by the percentage change in its price Greater than 1.0 = elastic supply or demand Less than 1.0 = inelastic supply or demand Example: 10 percent increase in cigarette prices results in 3 percent sales decline = inelastic
Copyright © 2010 Nelson Education Ltd Determinants Of Elasticity Availability of Substitutes or complements If many are available, demand tends to be elastic Role as complement to another product Example: Demand for motor oil is relatively inelastic Increasing number of online business transactions Increases demand elasticity as consumers have more choice Whether product seen as necessity or luxury Example: Price change has little effect on gas demand Portion of a persons budget spent on an item Larger the portion, more elastic the demand Demand often shows less elasticity in the short run than in the long run
Copyright © 2010 Nelson Education Ltd Breakeven Chart
Copyright © 2010 Nelson Education Ltd. Yield Management Yield Management Pricing strategy that allows marketers to vary prices based on such factors as demand, even though the cost of providing those goods or services remains the same Example: Varying prices for tickets to a play based on day, time, and seat location Example: Varying availability of restricted and non- restricted airline tickets in the months and weeks before the flight to maximize revenues 17-15
Copyright © 2010 Nelson Education Ltd Global Issues in Price Determination Prices must support the firms broader goals Use four strategies same as in domestic markets: Profitabilityif company is a price leader Volumeexpose foreign markets to competition when trade barriers are lowered Meeting competitionimportant in Europe where common currency has led to price convergence Prestigevalid when products are associated with intangible benefits (quality, exclusivity, design) Also a fifth objectiveprice stability Especially important for producers of commodities who are more susceptible to fluctuating prices than producers of value-oriented products
Chapter 6: Elasticity. Elasticity A measure of the responsiveness of one variable (usually quantity demanded or supplied) to a change in another variable.
CH 2CH 2 The Economics of Price Determination Kent B. Monroe (2007). Pricing: Making Profitable Decisions. 3 rd Edition (Singapore: McGraw-Hill).
Monopoly CHAPTER 12. After studying this chapter you will be able to Explain how monopoly arises and distinguish between single-price monopoly and price-discriminating.
MONOPOLY 12 CHAPTER. Objectives After studying this chapter, you will able to Explain how monopoly arises and distinguish between single-price monopoly.
Chapter 4 Marketing Begins with Customers Study Guide.
Chapter Global Marketing and R&D 17. McGraw-Hill/Irwin International Business, 5/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved Case:
Pricing Pricing Objectives Pricing Methods Pricing Strategies.
Chapter pricing concepts for establishing value thirteen Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin.
© 2010 Pearson Addison-Wesley CHAPTER 1. © 2010 Pearson Addison-Wesley.
DEMAND AND SUPPLY IN FACTOR MARKETS 17 CHAPTER. Objectives After studying this chapter, you will able to Explain how firms choose the quantities of labor,
McGraw-Hill/Irwin Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved.
PRICING. 21. What might happen if a business’s customers feel that they are not getting the most value for their money? A. Sales remain the same B. sales.
Copyright 2006 – Biz/ed Pricing Strategies.
When you have completed your study of this chapter, you will be able to C H A P T E R C H E C K L I S T Explain how monopoly arises and distinguish between.
© 2010 Pearson Addison-Wesley. What Is Perfect Competition? Perfect competition is an industry in which Many firms sell identical products to many buyers.
Lesson 7-1 The Marketplace Consumers influence the price of goods in a market economy. -A market represents actions between buyers and sellers.
Performance Indicator 3.06 Develop a foundational knowledge of pricing to understand its role in marketing.
Business Plan Brief summary of Executive Summary and Business Plan.
Perfect Competition CHAPTER 11. After studying this chapter you will be able to Define perfect competition Explain how firms make their supply decisions.
Managing Transnational Corporations Global Marketing and R & D.
Trieschmann, Hoyt & Sommer Workers Compensation and Alternative Risk Financing Chapter 12 ©2005 Thomson/South-Western.
1 Elasticity of Demand and Supply Topic 3. 2 Topic Objectives 1.Explaining elasticity of demand, its measurement, categories and determinants. 2.Understand.
McGraw-Hill/Irwin Copyright © 2008 by The McGraw-Hill Companies, Inc. All rights reserved. Chapter 5 The Value of Information.
Copyright © 2007, Nelson, a division of Thomson Canada Ltd.. A Lecture Presentation in PowerPoint to accompany Exploring Economics by Robert L. Sexton.
Chapter 15 Preparing for partnership with suppliers: cost approaches and techniques.
7-1 Chapter 7 Copyright © 2010 by Nelson Education Limited. Promotional and Pricing Strategies 7 PowerPoint Presentation by Ian Anderson, Algonquin College.
Chapter 20: Elasticity McGraw-Hill/Irwin Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved. 13e.
Chapter 4 Supply Contracts Introduction Significant level of outsourcing Many leading brand OEMs outsource complete manufacturing and design of.
Chapter 4 The Law of Demand What is Demand? Quantity demanded of a product or service is the number that would be bought by the public at a given price.
MONOPOLISTIC COMPETITION AND OLIGOPOLY 13 CHAPTER.
© 2016 SlidePlayer.com Inc. All rights reserved.