Chapter 25 Kaden Steele Section I

What is price? Price: value of money for a good or service. Ex. $25 Mouse. Price can be a deal. Ex. Buy one get one free. Bartering is the oldest form of pricing. Involved exchanging one good or service for another. No money exchanged in bartering.

Relationship of Product Value Value: matter of anticipated satisfaction. Higher the value more customer is willing to pay. Seller gauges value of product. Goal: high enough to make profit, not exceeds value potential.

Importance of Price Price important factor in success/failure of business. Pricing helps maintain firm’s images, competitive edge, profits. Customers uses price to pick companies and products. Profit is determined by price. Sales revenue=price*quantity sold

Various Forms of Price Various forms of price include... Rent Tuition Interest Fees Purchases Price is involved in every transaction.

Gaining Market Share Taking business away from competitors makes you more relative A company's market share shows their relativity and importance to the market A company’s market position shows the changing companies and market within a certain market To grow a company you need to increase advertising expenditures, change your product designs, and create new distribution techniques.

Earning a Profit The relative profitability of a product Rate of return = profit/investment Minimizing production cost Suggested retail price that consumers are willing to pay is a factor

Meeting the Competition There are many ways to compete with other companies other than just pricing. Some of these methods include but aren’t exclusive to: quality of the product, uniqueness of a product, business location and hours, level of service, warranties, etc.

Chapter 25 Section II

Cost and Expenses Businesses must constantly monitor, analyze, the prices and sales in the light of cost and expenses. Many factors have be to consider when rising or lowering prices.

Supply and Demand Demand goes up when supply goes down, and demand goes down when prices goes up. Demand Elasticity- Degree to which demand for a product is affected by its price Products have either elastic or inelastic demand.

Consumer Perception Consumer perception about the relationship between price and quality or other values also play a price in price planning. Ex:Some businesses create the perception that a particular product is worth more than others by limiting the supply of the item in the market.

Competition A company can use a low price when it target market is price conscious. When a target market is not price conscious, any company can restore to various forms of non price competition. Nonprice comp. Minimizes price as a reason for purchasing

Price Fixing Occurs when competitors agree on a certain price ranges within which they set their own prices -There was communication along the competing firms to establish price range. Price fixing is illegal because it eliminates competition.

Unit pricing Allows consumers to compare prices in relation to a standard unit of measure. The unit for canned foods may be ounces or pounds Foods that cost less per unit are not always the better buy. Large size isn't a good buy if you can't use it before it spoils.

Price discriminations Occurs when a firm charges different prices to similar customers in similar situations Clayton Antitrust Act of 1914 defines prices discrimination as creating unfair competition

What is a constant? Occurring continuously over a period of time. Keeps going normally doesn't stop. Ex: the price will will have a constant change. There are 4 key market factors that must be known Expense, supply and demand, consumer, and competition

Pricing Ethics Keeping prices reasonable, not over charging even when demand is high (price gouging) Price gouging is considered unethical and illegal in many states Especially during natural disaster

Unfair Trade Practices Some states have enacted “sales below cost” or “unfair sales” prohibiting certain below sales costs In states where minimum price laws are not in effect business price items lower to gain attention, this is called a loss leader

Price Advertising Federal Trade Commission (FTC) has set strict guidelines for pricing advertising A company cannot advertise a price reduction unless an original price has already been advertised to the public on a regular basis A company cannot claim its prices are lower than competitors without proof A company cannot advertise a low price for an item they have no intention of selling, (bait-and-switch)