Marketing’s Role in the Global Economy Chapter 12 Chapter One Marketing’s Role in the Global Economy Price Determination For use only with Perreault and McCarthy texts. © 2002 McGraw-Hill Companies, Inc. McGraw-Hill/Irwin

Marketing’s Role in the Global Economy Chapter Goals Chapter One Marketing’s Role in the Global Economy Meaning of price Significance of price Concept of price and value relationship Pricing objectives Factors influencing price Costs of producing and marketing a product Approaches to determining price Break-even analysis For use only with Perreault and McCarthy texts. © 2002 McGraw-Hill Companies, Inc. McGraw-Hill/Irwin

other items with utility Meaning of Price Dues PRICE Amount of money and/or other items with utility needed to acquire a product Salary Wage Fare Tuition Interest Rent Commission

Importance of Price Economy Firm Customer

Value Benefits Value = __________________ Price + Incurred costs

Pricing Objectives: Profit-Oriented Achieve a Target Return Maximize Profits

Pricing Objectives: Sales-Oriented Increase Sales Volume Maintain or Increase Market Share

Pricing Objectives: Status Quo Meet Competition Stabilize Prices

Factors Influencing Price Estimated Demand Expected price Demand curve Price elasticity Competitive Reactions

Price and Marketing Mix Distribution Channels Promotion Price Product

Costs for an Individual Firm Inverse Demand

Unit Cost Curves of a Firm Unit Cost Curves of a Trim

Cost-Plus Pricing SELLING PRICE = Total Cost + Profit Setting the price of one unit of a product equal to the total cost of the unit plus the desired profit on the unit SELLING PRICE = Total Cost + Profit

King’s Kastles

Markup Pricing

Break-Even Analysis B E P : Total revenue = Total costs BREAK-EVEN POINT The quantity of output at which total revenue equals total costs assuming a certain selling price B E P : Total revenue = Total costs

Computation of Break-Even Point

Break-Even Chart

Demand Schedule for a Firm

Marginal Analysis

Pricing and Competition Perfect Competition Above Competition Below Competition

Kinked Demand Curve

Marketing’s Role in the Global Economy Key Terms and Concepts Chapter One Marketing’s Role in the Global Economy Price Barter Value Pricing objectives Base price Expected price Inverse demand Fixed cost Total fixed cost Average fixed cost Variable cost Total variable cost Total cost Average total cost Marginal cost Average fixed cost curve Average variable cost curve Average total cost curve Marginal cost curve For use only with Perreault and McCarthy texts. © 2002 McGraw-Hill Companies, Inc. McGraw-Hill/Irwin

Marketing’s Role in the Global Economy Key Terms and Concepts Chapter One Marketing’s Role in the Global Economy Cost-plus pricing Break-even analysis Break-even point Marginal revenue Average revenue Pricing to meet competition Perfect competition Kinked demand Dynamic pricing Oligopoly Pricing below competition Pricing above competition For use only with Perreault and McCarthy texts. © 2002 McGraw-Hill Companies, Inc. McGraw-Hill/Irwin