Lecture on Building the Price Foundation www.AssignmentPoint.com

NATURE AND IMPORTANCE OF PRICE What is a Price? Barter

The price of four different purchases

Lamborghini What will this car cost?

NATURE AND IMPORTANCE OF PRICE Price as an Indicator of Value Value-pricing Price in the Marketing Mix Profit Equation

Steps in setting price

STEP 1: IDENTIFY PRICING CONSTRAINTS AND OBJECTIVES Identifying Pricing Constraints Demand for the Product Class, Product, and Brand Newness of the Product: Stage in the Product Life Cycle Single Product versus a Product Line Cost of Producing and Marketing the Product

STEP 1: IDENTIFY PRICING CONSTRAINTS AND OBJECTIVES Identifying Pricing Constraints Cost of Changing Prices and Time Period They Apply Types of Competitive Markets Pure monopoly Oligopoly Monopolistic competition Pure competition

Pricing, product, and advertising strategies available to firms in four types of competitive markets

STEP 1: IDENTIFY PRICING CONSTRAINTS AND OBJECTIVES Identifying Pricing Constraints Competitors’ Prices

STEP 1: IDENTIFY PRICING CONSTRAINTS AND OBJECTIVES Identifying Pricing Objectives Profit

Where each dollar of your movie ticket goes

STEP 1: IDENTIFY PRICING CONSTRAINTS AND OBJECTIVES Identifying Pricing Objectives Sales Market Share Unit Volume Survival Social Responsibility

STEP 2: ESTIMATE DEMAND AND SERVICE Fundamentals of Estimating Demand The Demand Curve

Illustrative demand curves for Newsweek magazine

STEP 2: ESTIMATE DEMAND AND SERVICE The Demand Curve Demand factors Movement Along versus Shift of a Demand Curve

STEP 2: ESTIMATE DEMAND AND SERVICE Fundamentals of Estimating Revenue Total revenue Average revenue Marginal revenue

Fundamental revenue concepts

How a downward-sloping demand curve affects total, average, and marginal revenue

STEP 2: ESTIMATE DEMAND AND SERVICE Fundamentals of Estimating Revenue Price Elasticity of Demand Price Elasticity for Brands and Product Classes

STEP 3: DETERMINE COST, VOLUME, AND PROFIT RELATIONSHIPS The Importance of Controlling Costs Total cost Fixed cost Variable cost Marginal cost

Fundamental cost concepts

STEP 3: DETERMINE COST, VOLUME, AND PROFIT RELATIONSHIPS Marginal Analysis and Profit Maximization

Profit maximization pricing

STEP 3: DETERMINE COST, VOLUME, AND PROFIT RELATIONSHIPS Break-Even Analysis Break-even point Break-even chart Calculating a Break-Even Point

Calculating a break-even point

Break-even analysis chart