10-1 Chapter 10 Pricing Considerations and Approaches

10-2 Factors to Consider When Setting Prices Internal Factors Pricing Decisions Pricing Decisions External Factors Price is the Amount of Money Charged for a Product or Service.

10-3 Internal Factors Affecting Pricing Decisions Marketing Objectives Marketing-Mix Strategy Costs Organizational Considerations

10-4 External Factors Affecting Pricing Decisions Market and Demand Competitors’ Costs, Prices, and Offers Other External Factors Economic Conditions Reseller Needs Government Actions Social Concerns

10-5 Market and Demand Factors that Affect Pricing Decisions Pure Competition Many Buyers and Sellers Who Have Little Effect on the Price. Pure Competition Many Buyers and Sellers Who Have Little Effect on the Price. Monopolistic Competition Many Buyers and Sellers Who Trade Over a Range of Prices. Monopolistic Competition Many Buyers and Sellers Who Trade Over a Range of Prices. Oligopolistic Competition Few Sellers Who Are Sensitive to Each Other’s Pricing/ Marketing Strategies Oligopolistic Competition Few Sellers Who Are Sensitive to Each Other’s Pricing/ Marketing Strategies Pure Monopoly Single Seller Pure Monopoly Single Seller Pricing in Different Types of Markets

10-6 Price Elasticity of Demand Price Quantity Demanded per Period A. Inelastic Demand - Demand Hardly Changes With a Small Change in Price. P2P2 P1P1 Q1Q1 Q2Q2 Price Quantity Demanded per Period P’ 2 P’ 1 Q1Q1 Q2Q2 B. Elastic Demand - Demand Changes Greatly With a Small Change in Price.

10-7 Minimizes Price Competition Minimizes Price Competition What is Cost-Plus Pricing and Why is it Popular? Perceived Fairness to Both Buyers and Sellers Perceived Fairness to Both Buyers and Sellers Sellers Are More Certain About Costs Than Demand Sellers Are More Certain About Costs Than Demand Adding a Standard Markup to the Cost of the Product.

10-8 Breakeven Analysis or Target Profit Pricing ,000 Total Revenue Total Cost Fixed Cost Target Profit ($2 million) Sales Volume in Units (thousands) Cost in Dollars (millions) Tries to Determine the Price at Which a Firm Will Break Even or Make a Target Profit 0

10-9 Cost-Based Vs. Value-Based Pricing Product Cost Price Value Customers Customer Value Price Cost Product Cost-Based Pricing Value-Based Pricing