April 30, 2012

 Price – The value placed on goods and services being exchanged  Determines profit or loss  Demand  Cost  Product Life Cycle  Competition

 Prestige Pricing – pricing based on consumer perception  Odd-even pricing – pricing goods with an odd number or an even number to match a product’s image  $25.99  $100

 Target Pricing – pricing good according to what customers are willing to pay  Estimate target price and work backwards to determine how much to charge customer or intermediaries

 Demand  Elastic – change in price will effect demand  Inelastic – product is a necessity, there are no substitutes

 Cost  Markup – the difference between the wholesale/retail price and the cost of the item  Represented as dollar value or percentage ▪ Cost method ▪ Retail method

 Cost to produce good = $25  Retail price = $49.99  Markup Value ▪ Dollar = $24.99 ▪ Percentage ▪ Cost = 100% ($24.99/$25.00) ▪ Retail = 50% ($24.99/$49.99)

 Product Line Pricing – setting different markup percentages for each product so average markup is achieved for the entire line of goods  Can differ for each product line

 Cost-Plus Pricing – calculating all costs and expenses and adding desired profits  Cost of production  Employee Salaries  Rent

 Newness of Product  Competition  Non-Price Competition  Competition based on quality, service, and relationships

Do some research on stadiums of similar size and/or location, and create a chart mapping out the different price levels they offer. What types of pricing did you find?

 Cost-plus Pricing  Prestige Pricing  Odd Even Pricing  Target Pricing  Product Line Pricing

 Markup – Three Kinds  Dollar  Percentage – Cost  Percentage - Retail

 Bobbleheads are purchased at cost for $10/each and resold at $20. Calculate the following:  Dollar Markup =  Cost Markup =  Retail Markup = $10 Markup/Cost = 100% Markup/Retail = 50%

 If we buy T-Shirts at $7, and want to add a 50% cost markup, how much should our retail price be? Cost = $ % of cost = $3.50 $ $7.00 = $10.50

 If we buy the same T-Shirts at $7, and sell them for $10.50, how much is the retail markup? Markup = $3.50 Retail = $10.50 Markup/Retail = 33.3%

 Market Share – the percentage of the total sales of all companies that sell the same type of product

 Price Lining  Bundle Pricing  Loss-leader Pricing  Yield Management Pricing

 Price Lining- selling all goods in a product line at specific price points ($39.99, $59.99, $79.99)

 Bundle Pricing - Selling several items as a package for a set price

 Loss Leader Pricing – pricing an item at cost or below cost to draw customers into the store

 Yield-management pricing – pricing items at different prices to maximze revenue when limited capacity is involved

 Price Fixing – an illegal practice where competitors conspire to set the same prices  Predatory Pricing – Setting a very low price in order to drive competitors out of business  Both made illegal by Sherman Anti-Trust Act

 Price Discrimination – charging different prices to similar buyers  Originally prohibited by Clayton Act and the Robinson-Patman Act  Today, as long as it doesn’t lessen competition, it is generally considered legal

 Cost-plus Pricing  Prestige Pricing  Odd Even Pricing  Target Pricing  Product Line Pricing  Price Lining  Bundle Pricing  Loss-leader Pricing  Yield Management Pricing

If demand increases and supply remains unchanged, then it leads to higher equilibrium price and higher quantity. If demand decreases and supply remains unchanged, then it leads to lower equilibrium price and lower quantity. If supply increases and demand remains unchanged, then it leads to lower equilibrium price and higher quantity. If supply decreases and demand remains unchanged, then it leads to higher equilibrium price and lower quantity.

 Similar to Phase II  Multiple Choice  Short Answer  Short Essay/Case Study