Chapter 17 Pricing Concepts. IntroductionIntroduction Price: the exchange value of a good or service some unit of value given up for something of value.

Slides:



Advertisements
Similar presentations
Chapter 13 Pricing concepts
Advertisements

Pricing: Understanding and Capturing Customer Value
Pricing: Understanding and Capturing Customer Value
Objective 5.02 The Price Strategy.
 Copyright 1999 Prentice Hall 10-1 Chapter 10 Pricing Products: Pricing Considerations and Approaches PRINCIPLES OF MARKETING Eighth Edition Philip Kotler.
©2002 South-Western Chapter 17 Version 6e1 chapter Pricing Concepts 17 Prepared by Deborah Baker Texas Christian University.
Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Chapter 13 Price Determination.
PRICING Key Concepts. The Importance of Price Price allocates resources in a free-market economy To the consumer... Price is the COST of something To.
Pricing Strategies.
Principles of Marketing
Principles of Marketing
Chapter 19 Pricing Concepts. IntroductionIntroduction Price: the exchange value of a good or service some unit of value given up for something of value.
PRICE. Yes, But What Does It Cost? Price is the value that customers give up or exchange to obtain a desired product Payment may be in the form of money,
Learning Goals Identify and define the internal factors affecting a firm’s pricing decisions Identify and define the external factors affecting pricing.
Chapter 29 Price Planning. What is Price? Price – is the value of money placed on a good or a service. The seller’s objective is to set a price high enough.
BUILDING THE PRICE FOUNDATION C HAPTER 13. What is a Price?  Barter Price as an Indicator of Value  Value-pricing Price in the Marketing Mix  Profit.
McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All Rights Reserved.
© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/IrwinSlide 13-2 BUILDING THE PRICE FOUNDATION C HAPTER.
Pricing Strategy …critical marketing mix variable actually produces revenue shortest term marketing mix variable relates directly to microeconomics supply.
$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$
1 Copyright ©2009 by Cengage Learning Inc. All rights reserved Designed by Eric Brengle B-books, Ltd. CHAPTER 19 Pricing Concepts Prepared by Amit Shah.
Definition Price The amount of money charged for a product or service, or the sum of the values that consumers exchange for the benefits of having or using.
Chapter 18 © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole.
1 Copyright ©2009 by Cengage Learning Inc. All rights reserved Designed by Eric Brengle B-books, Ltd. CHAPTER 19 Pricing Concepts Prepared by Amit Shah.
Pricing Concepts Chapters 13.
Copyright © 2002 by Nelson, a division of Thomson Canada Limited. Chapter chapter 15 Prepared by Angela Zigras, Seneca College Deborah Baker,
1 Chapter 19: Pricing Concepts Prepared by Amit Shah, Frostburg State University Designed by Eric Brengle, B-books, Ltd. Copyright 2010 by Cengage Learning.
© iStockphoto.com/ktsimage Lamb, Hair, McDaniel Chapter 19 Pricing Concepts © Cengage Learning All Rights Reserved.
Chapter 19 Copyright ©2012 by Cengage Learning Inc. All rights reserved 1 Lamb, Hair, McDaniel CHAPTER 19 Pricing Concepts © iStockphoto.com/ktsimage.
© 2002 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin BUILDING THE PRICE FOUNDATION.
Contemporary Marketing Wired, 9th Edition© 1998 The Dryden Press Chapter 13 Price Determination.
Objectives Understand the internal factors affecting a firm’s pricing decisions. Understand the external factors affecting pricing decisions, including.
Pricing Products: Understanding and Capturing Customer Value 10 Principles of Marketing.
1 Copyright © 2009 by Nelson Education, Ltd. All rights reserved. Chapter 16 Pricing Concepts 16 Canadian Adaptation prepared by Don Hill, Langara College.
10-1 Chapter 10 Pricing Considerations and Approaches.
1Chap. 17 Marketing 7e Lamb Hair McDaniel ©2004 South-Western/Thomson Learning Prepared by Deborah Baker Texas Christian University Chapter 17 Pricing.
Chapter 17 Pricing Concepts. The Importance of Price To the consumer... Price is the cost of something In the broadest sense, price allocates resources.
R.HARIHARAN AP/EEE.  Price: the exchange value of a good or service Manage demand Manage demand Adapt to competitive environment Adapt to competitive.
Chapter Ten Pricing: Understanding and Capturing Customer Value Copyright ©2014 by Pearson Education, Inc. All rights reserved.
Global Edition Chapter Ten Pricing: Understanding and Capturing Customer Value Copyright ©2014 by Pearson Education.
10-1 Chapter Ten Pricing: Understanding and Capturing Customer Value.
1 Copyright ©2006 by South-Western, a division of Thomson Learning. All rights reserved Chapter 14 Pricing Concepts Prepared by Deborah Baker Texas Christian.
Pricing Concepts
MARKETING STRATEGY O.C. FERRELL MICHAEL D. HARTLINE 8 Pricing Strategy.
Copyright Cengage Learning 2013 All Rights Reserved 1 Chapter 19: Pricing Concepts Introduction to Designed & Prepared by Laura Rush B-books, Ltd.
Pricing Strategy.  Focus on the value of your product / service delivers  Value = perceived benefits Price Know your competitor Reward staff for sales.
Chapter 15 Ver 2e1 Chapter 15 ©2000 South-Western College Publishing Pricing Concepts Prepared by Deborah Baker Texas Christian University.
Marketing April 20, 2015 Price Planning. Discuss with your neighbor  Discuss the relationship between price and the other P’s of the marketing mix. 
Chapter 19 Copyright ©2012 by Cengage Learning Inc. All rights reserved 1 Lamb, Hair, McDaniel Pricing Concepts © iStockphoto.com/ktsimage.
Chapter 17Copyright ©2009 Cengage Learning Inc. All rights reserved 1 MKTG Designed by Amy McGuire, B-books, Ltd. Prepared by Deborah Baker, Texas Christian.
Chapter 10- slide 1 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Chapter Ten Pricing Concepts Understanding and Capturing Customer.
Chapter 19 Pricing Concepts. What is Price? The value attached to the product or service Value: the “worth” based on perceived benefits What is given.
PRICING DECISIONS “There are two fools in every market. One charges a very high price and another charges a very low price”
Pricing Strategy. Price strategy One of the four major elements of the marketing mix is price. Pricing is an important strategic issue because it is related.
1© 2016 Cengage Learning. All Rights Reserved. MKTG9 Lamb, Hair, and McDaniel Chapter 20 Pricing Concepts.
Idil Yaveroglu Lecture Notes
Idil Yaveroglu Lecture Notes
EMPLOY PRICING STRATEGIES TO DETERMINE OPTIMAL PRICING
Pricing Considerations
Lecture on Building the Price Foundation
Principles of Marketing
12 Developing Pricing Strategies and Programs
Pricing: Understanding and Capturing Customer Value
Pricing Concepts Chapter 19 Lamb, Hair, McDaniel
Chapter 6: Estimating demand and revenue relationships
Pricing: Understanding and Capturing Customer Value
Pricing: Understanding and Capturing Customer Value
Objective 5.02 The Price Strategy.
PRICING DECISIONS “There are two fools in every market. One charges a very high price and another charges a very low price”
Pricing: Understanding and Capturing Customer Value
Presentation transcript:

Chapter 17 Pricing Concepts

IntroductionIntroduction Price: the exchange value of a good or service some unit of value given up for something of value

Other Terms Terms Used Tuition Fare Fine Tip Bribe

Price Competition CustomerNeeds PriceCompetition Slippery slope.

CustomerNeeds ProductCompetition PromotionCompetition DistributionCompetition Nonprice Competition Emphasize value and therefore increase quality AUCTION

The Importance of Price to Marketers Manage demand Manage demand Adapt to competitive environment Adapt to competitive environment Psychology of the consumer Psychology of the consumer BOTTOMLINE issues BOTTOMLINE issues

The Nature of Price Profits = Total Revenues - Total Costs or Profits =(Price x Quantity Sold) - Total Costs

Steps in Setting the Right Price Results lead to the right price Fine tune with pricing tactics Choose a price strategy Estimate demand, costs, and profits Establish pricing objectives

Pricing Objectives Profit-oriented Profit Maximization: Target-Return Objectives: achieving a specified return on either sales or investment ROI = Net Profit after taxes Total assets

Pricing Objectives Profitability Sales-oriented Sales maximization: Market-share objectives:for controlling a portion of the market

Price and Market Share

Pricing Objectives Meeting Competition Value Pricing Profitability Volume

Pricing Objectives Meeting Competition Prestige Prestige Objectives: set at a relatively high level Profitability Volume

Competitive Environment Number of sellers Product differences Importance of market mix Large number of sellers Similar products Distribution is important Large number of sellers Unique but substitutable Pricing is important- Differentiated products A few large competitors Similar products Promotion is key to achieve perceived product differences Single producer Unique and unsubstitutable Unimportant BASIS OF COMPARISON PURE COMPETITION MONOPOLISTIC COMPETITION OLIGOPOLYMONOPOLY Number of sellers ManyOne

PRICE DETERMINATION IN ECONOMIC THEORY Demand: schedule of the amounts of a firm’s good or service that consumers purchase at different prices during a specified period Supply: schedule of the amounts of a good or service that firms will offer for sale at different prices during a specified time period.

Determination of Demand The Demand Curve Price/Quantity Relationship Q1 200K Quantity $2.50 P1 D1D1D1D1 Price

Determination of Demand 200K 300K Quantity $2.50 P1 D1D1D1D1 Price $2.00 P2

Determination of Demand 200K 300K 400K 200K 300K 400K Quantity $2.50 P1 D1D1D1D1 Price $2.00 P2 $1.50 P3

Determination of Demand Price/Quantity Relationship and Demand Increasing 200K 400K Quantity P 1 P 1 $2.50 D1D1D1D1 D2D2D2D2 Price Shifting Demand Curves

The Concept Of Elasticity In Pricing Strategy Elasticity: measure of consumers responsiveness to changes in price Price Elasticity of Demand % Change in Quantity Demanded % Change in Price = If Abs(elasticity) > 1 then DEMAND is ELASTIC If Abs(elasticity) < 1 then DEMAND is INELASTIC

Determinants Of Elasticity Availability of Substitutes Luxury or Necessity Portion of Budget Time

Determination of Demand - INELASTIC Q2 Q1Q2 Q1Q2 Q1Q2 Q1 Quantity P1P1P1P1 P2P2P2P2 Price Demand is not very sensitive to price increases

Determination of Demand - ELASTIC Q2Q2Q2Q2 Quantity P1P1P1P1 P2P2P2P2 Q1Q1Q1Q1 Price Demand is very sensitive to price increases

Some Elasticity Calculations % Change in Price = 10% (increase) % Change in Quantity = -20% (decrease) Abs(Elasticity) = Elastic?

Some Elasticity Calculations % Change in Price = +10% (increase) % Change in Quantity = -5% (decrease) Abs(Elasticity) = Elastic?

Elasticity and Revenues Baseline Case 100 units $ 10 each Total Revenues = $ 10 * 100 units = $1000. Case I Let us drop price to $8. Demand increases to 110 units. Elasticity = Revenue =

Elasticity and Revenues Case II Let us drop price to $8. Demand increases to 150 units. Demand = Revenue =

Elasticity and Revenues When Price DECREASES, Total Revenues INCREASE for __________ products When Price DECREASES, Total Revenues DECREASE for _________ products

Elasticity and Revenues Price Goes... Revenue Goes... Demand is... DownUpElastic Down Inelastic Up Inelastic UpDownElastic Careful : Revenues DO not equal profitability!

Analysis of Demand, Cost, and Profit Relationships Fixed Costs – do not vary with # units produced Variable Costs – varies with # units produced Total Costs = Fixed Costs + Variable costs

Analysis of Demand, Cost, and Profit Relationships Fixed Costs Breakeven Point = _______________________________ Per Unit Contribution to Fixed Costs = Fixed Costs ___________________ Price - Variable Costs Breakeven Analysis:

Evaluation of Breakeven Analysis Effective tool in assessing the sales required for covering costs and achieving specified levels of profit. Sensitivity analysis. Easily understood

Analysis of Demand, Cost, and Profit Relationships Determining the Breakeven Point Quantity (Units of Production) Fixed Costs Total Revenue Total Costs Breakeven Point Dollars

Analysis of Demand, Cost, and Profit Relationships Determining the Breakeven Point Units of Production Fixed Costs Total Revenue Total Costs Breakeven Point Dollars Losses

Analysis of Demand, Cost, and Profit Relationships Determining the Breakeven Point Units of Production Fixed Costs Total Revenue Total Costs Breakeven Point Profits Dollars

Breakeven Analysis Selling Price = $ 100 per unit Variable costs = $ 50 per unit Total Fixed Costs = $150, 000 Contribution = Breakeven Point = _______________________________ Per Unit Contribution to Fixed Costs Fixed Costs

Breakeven (continued) Breakeven point (in terms of unit sales) = _____ units Breakeven point (in terms of $ sales volume) = ____________ = $300,000

Other factors: Pricing and the Life Cycle IntroductoryStageGrowthStageDeclineStage $High$Stable$Decrease MaturityStage $Decrease

Pricing Strategies Skimming pricing strategy: the use of a high price relative to competitive offerings. Skimming

Pricing Strategies Penetration pricing policy: the use of relatively low price as compared with competitive offerings Skimming Penetration Psychological