1. Market Factors Affecting Price
MKT-FMRE-7
Utilize pricing strategies to maximize return on merchandising efforts and meet customers’ perception of value.

2. Terms Price Couture Bridge lines Better garments Moderate lines
Budget lines
Markup
Break even point
Odd/even pricing
Inelastic demand
Elastic demand
Revenue
Variable costs
Fixed costs
Penetration pricing
Price fixing

3. Terms
Price – the amount the consumer pays for merchandise.

4. Couture
– custom made designs
Highest priced category
Elie Saab

5. Bridge lines
Secondary lines of well-known designers priced between couture and better categories.
Also known as diffusion line
Zac Posen collection for
David’s Bridal

6. Better garments Reasonably priced garments that maintain high quality.
Found in specialty stores and department stores like Chaps by Ralph Lauren.
Michael macys.com

7. Moderate Lines Medium priced garments with well-known
brand names like Levi’s and private brands in department stores.
INC international concepts

8. Budget lines Least expensive category Knockoffs
Downscaled duplications
Target - Sweater Back Vest Navy
Xhilaration

9. Markup
It’s the difference between the cost of a good or service and its selling price.
A markup is added onto the total cost incurred by the producer of a good or service in order to cover the costs of doing business and create a profit.

10. Break even point
The point at which cost or expenses and revenue are equal: there is no net loss or gain, and one has "broken even."

11. Odd/even pricing
A psychological pricing strategy used to attract a price conscious and prestiguous market.
$299 – odd
$300 - even

12. Inelastic demand
A situation in which the demand for a product does not increase or decrease correspondingly with a fall or rise in its price.
An example of a product with inelastic demand is gasoline.

13. Elastic demand
Demand that increases or decreases as the price of an item goes down or up.
clothing

14. Revenue
Money that is made by or paid to a business or an organization.

15. Fixed costs
Fixed costs remain constant throughout the given time period. It often includes rent, buildings, machinery, etc.

16. Variable costs Variable costs are costs that vary with output.
Variable costs may include wages, utilities, materials used in production, etc.

17. Penetration pricing
The practice of offering a low price for a new product or service during its initial offering in order to attract customers away from competitors.

18. Price fixing
Price fixing is an agreement among competitors that raises, lowers, or stabilizes prices.
 The antitrust laws require that each company establish prices and other terms on its own, without agreeing with a competitor.

19. EQ:
What is price (selling price, retail price)?

20. Objectives Define Price and Pricing
List the four market factors that affect price
Identify and discuss each market factor
Define elastic demand and inelastic demand
List the 5 factors that contribute to demand elasticity
Identify and discuss each factor

21. Price & Pricing
Price: the money a customer must pay for a product or service.
Part of the Marketing Mix
Pricing: establishing and communicating the value of products and services to potential customers.

22. Four Major Market Factors That Affect Price
Costs and Expenses
Supply and Demand
Consumer Perceptions
Competition

23. 1. Costs and Expenses Increasing costs and expenses lead companies to:
Increase price of product or service
Reduce size of product or service
Drop service that is not valued
Add to their product or service

24. Costs and Expenses contd.
Lower costs and expenses lead companies to:
Decrease prices of products and services
Improved technology and less expensive materials help companies produce better-quality products at lower prices.
Example: the price of computers

25. 2. Supply and Demand With most products:
Demand increases with lower prices
Demand decreases with higher prices
This does not apply to some products
Demand Elasticity
The degree to which demand for a product is affected by its price
Products have either elastic or inelastic demand

26. Elastic Demand When a change in price creates a change in demand.
Example: Price of Steak
Law of Diminishing Marginal Utility
Consumers will only buy so much of a product even if the price is low.
Example: Price of Laundry Detergent

27. Inelastic Demand
When a change in price has very little effect on demand for a product
Example:
Milk
Bread

28. Demand Elasticity The demand elasticity depends on five factors:
Brand Loyalty
Availability of Substitutes
Price Relative to Income
Luxury vs. Necessity
Urgency of Purchase

29. Brand Loyalty
When a customer will not buy a substitute product over a brand name of their choice.
In this case brand is inelastic.

30. Availability of Substitutes
When there are a variety of substitutes that will do the same job, the demand becomes elastic.
Example:
Laundry Detergent

31. Price Relative to Income
If a price increases dramatically and it is beyond a customer’s budget, they are less likely to buy it.
In this situation the demand will be elastic.
Example:
A diamond ring

32. Luxury vs. Necessity
When a consumer feels that a product is a necessity, the demand becomes inelastic.
Example:
medicine
When a consumer feels that a product is a luxury, the demand becomes elastic.
automobile

33. Urgency of Purchase
If a purchase must be made immediately then the demand will be inelastic.
Example:
Running out of gas

34. 3. Consumer Perceptions
Price planning involves what the consumers perceive
Some consumers associate quality with price
High price equals high quality
High price equals status, prestige, and exclusiveness

35. 3. Consumer Perceptions
Businesses limit a supply on the market to make the consumer think that it is worth more.
Example:
Limited Edition
Personalized service can also add to a customer’s perception.

36. 4. Competition 2 Forms: Non-Price Competition Price Competition
Non-price competition minimizes price as a reason for purchase. The more unusual a product, the greater the freedom to set prices above those of competitors.
Price competition allows a company to gain target market appeal by lowering prices.

37. 4. Competition
Companies are constantly watching each other. If one lowers their price, their competitors will lower their price too.
Benefit: lower prices for consumers
Price Wars:
When a company lowers their price to the point that they lose profits. Can cause financial trouble.

38. Summary Defined Price and Pricing
Listed the four market factors that affect price
Identified and discussed each market factor
Defined elastic demand and inelastic demand
Listed the 5 factors that contribute to demand elasticity
Identified and discussed each factor