1. Pricing Concepts Chapter 19 Lamb, Hair, McDaniel 2013-2014
Chapter 19 Pricing Concepts
Pricing Concepts
Chapter 19
Lamb, Hair, McDaniel
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Chapter 19 Pricing Concepts 1
Discuss the importance of pricing decisions to the economy and to the individual firm
List and explain a variety of pricing objectives
Explain the role of demand in price determination 2 3
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Chapter 19 Pricing Concepts 4
Understand the concept of yield management systems
Describe cost-oriented pricing strategies
Demonstrate how the product life cycle, competition, distribution and promotion strategies, customer demands, the Internet and extranets, and perceptions of quality can affect price 5 6
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4. The Importance of Price to Marketing Managers
Chapter 19 Pricing Concepts
The Importance of Price to Marketing Managers
Revenue
The price charged to customers multiplied by
the number of units sold.
Profit
Revenue minus expenses. 1 1
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Chapter 19 Pricing Concepts
Pricing Objectives
Profit Oriented
Sales Oriented
Status Quo 2
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6. Profit-Oriented Pricing Objectives
Chapter 19 Pricing Concepts
Profit-Oriented Pricing Objectives
Profit-Oriented Pricing Objectives
Profit
Maximization
Satisfactory Profits
Target Return on
Investment 2
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7. Sales-Oriented Pricing Objectives
Chapter 19 Pricing Concepts
Sales-Oriented Pricing Objectives
Market
Share
Sales
Maximization
Sales-Oriented Pricing Objectives 2
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8. Status Quo Pricing Objectives
Chapter 19 Pricing Concepts
Status Quo Pricing Objectives
Maintain
existing
prices
Meet
competition’s
Status Quo Pricing Objectives 2
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9. The Demand Determinant of Price
Chapter 19 Pricing Concepts
The Demand Determinant of Price
Demand
The quantity of a product that will be sold in the market at various
prices for a specified period.
Supply
The quantity of a product that will
be offered to the market by a supplier
at various prices for a specific period. 3
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10. How Demand and Supply Establish Price
Chapter 19 Pricing Concepts
How Demand and Supply Establish Price
Price
Equilibrium
The price at which demand
and supply are equal.
Elasticity of Demand
Consumers’ responsiveness
or sensitivity to changes
in price. 3
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Elasticity of Demand
Chapter 19 Pricing Concepts
Elastic Demand
Consumers buy more or less of a product when the price changes.
Inelastic Demand
An increase or a decrease in price will not significantly affect demand.
Unitary Elasticity
An increase in sales exactly offsets a decrease in prices, so total revenue remains the same. 3
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12. Factors that Affect Elasticity of Demand
Chapter 19 Pricing Concepts
Factors that Affect Elasticity of Demand
Availability of substitutes
Price relative to
purchasing power
Product durability
A product’s other uses
Rate of inflation 3
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13. Yield Management Systems
Chapter 19 Pricing Concepts
Yield Management Systems
Discounting early purchases
Limiting early sales at discounted prices
Overbooking capacity 4
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14. The Cost Determinant of Price
Chapter 19 Pricing Concepts
The Cost Determinant of Price
Varies with changes
in level of output
Types of Costs
Variable
Cost
Fixed Cost
Does not change
as level of output changes 5
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15. The Cost Determinant of Price Methods Used to Set Prices
Chapter 19 Pricing Concepts
Break-Even
Pricing
Profit Maximization Pricing
Keystoning
Markup pricing
Methods
Used to
Set Prices 5
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16. Other Determinants of Price
Chapter 19 Pricing Concepts
Other Determinants of Price
Perceived Quality
Promotion Strategy
Distribution Strategy
Competition
Stages of the
Product Life Cycle 6
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17. The Relationship of Price to Quality
Chapter 19 Pricing Concepts
The Relationship of Price to Quality
Prestige Pricing
Charging a high price to help promote a high-quality image. 6
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Chapter 19 Pricing Concepts
Dimensions of Quality
Ease of use
Versatility
Durability
Serviceability
Performance
Prestige 6
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