1. Price

2. What factors influence price?
Class Brainstorm

3. Other names for price Rent Wage Commission Tuition Dues Salary Fee
Bonus
Interest

4. Factors which determine price
Profit the company hopes to make
Cost of doing business
Laws
Product positioning
Consumer demand
Competition

5. Activity (in small groups 1-3)
Choose a product from the provided flyer or an item you find on your phone
Evaluate the product and price
List as many reasons as possible why the product costs that much

6. Goals of Pricing Making a profit or getting return on investment
Gaining market shares
Meeting the competition

7. Return on investment
Is a calculation that is used to determine the relative profitability of a product
𝑅𝑎𝑡𝑒 𝑜𝑓 𝑅𝑒𝑡𝑢𝑟𝑛=𝑃𝑟𝑜𝑓𝑖𝑡÷𝐼𝑛𝑣𝑒𝑠𝑡𝑚𝑒𝑛𝑡
Example you sell watches to retailers for $9 each. They cost you $7.50 per unit to make and market.
𝑃𝑟𝑜𝑓𝑖𝑡=𝑠𝑒𝑙𝑙𝑖𝑛𝑔 𝑝𝑟𝑖𝑐𝑒−𝑐𝑜𝑠𝑡 or $9−$7.50=$1.50
𝑅𝑎𝑡𝑒 𝑜𝑓 𝑅𝑒𝑡𝑢𝑟𝑛=$1.50÷$7.50=.20 or 20%

8. Gaining Market Shares
Sometimes a business will forgo making profit for such reasons as
To gain market shares
To change market position (their standing in comparison to their competitors)

9. Meeting the Competition
Simply following the competitors lead

10. Mark Up (Also know as ROI)
Why do retailers mark up the cost of a product from the manufacturer’s price?
What do they use this extra money for?
Is it all profit?
What is Foot Locker’s ROI?
Manufacturer sells a pair of sneakers to Foot Locker for $30
Foot Locker sells sneakers to the customer for $45
Customer is expected to pay $45 + tax

11. Activity (to be done individually)
EB Games store buys a PlayStation 4 from the manufacturer for $350 and sells it to the customer for $ What is the ROI EB Games uses to determine the selling price?
Suppose the manufacturer changes the price to $300, calculate the new mark up

12. Variable Costs
Are costs that go up or down depending on the amount of product made or service provided

13. Fixed costs
Are costs that never change regardless of how many products are produced by a company

14. Gross Profit
Is the money left over after raw materials and packaging have been paid for
𝐺𝑟𝑜𝑠𝑠 𝑃𝑟𝑜𝑓𝑖𝑡=𝑆𝑒𝑙𝑙𝑖𝑛𝑔 𝑃𝑟𝑖𝑐𝑒−𝑉𝑎𝑟𝑖𝑎𝑏𝑙𝑒 𝐶𝑜𝑠𝑡𝑠

15. Break-Even Analysis
Is the first step in calculating the price at which to sell a product or service to determine how many units must be sold at a given price to cover operating costs such as rent, salaries, etc.

16. Activity (in small groups)
Look at the companies listed at the end of today’s worksheet. List variable and fixed costs they would have.
We will then share our answers with the class, each group is expected to share their answers.