1. Chapter 19 Pricing Concepts

2. What is Price? The value attached to the product or service Value: the “worth” based on perceived benefits What is given up in exchange for the good or service Currency; credit Barter: exchange of products for something other than money

3. The Importance of Price to Marketing Managers Revenue The price charged to customers multiplied by the number of units sold. Profit Revenue minus expenses.

4. Fundamentals of Pricing Determine pricing objectives Know the importance of price to the target market Know your demand Understand your costs Determine the pricing strategy

5. Pricing Objectives Profit Orientation Sales orientation Status Quo orientation Societal orientation

6. Profit Oriented Pricing Objectives Profit Maximization Satisfactory profits Target Return on Investment

7. Sales Oriented Pricing Objectives Market Share Sales Maximization

8. Status Quo Pricing Objectives Maintain Existing Prices Meet Competition’s prices

9. The Demand Determinant of Price Demand The quantity of a product that will be sold in the market at various prices for a specified period. Supply The quantity of a product that will be offered to the market by a supplier at various prices for a specific period. The quantity of a product that will be offered to the market by a supplier at various prices for a specific period.

10. The Demand Curve

11. The Supply Curve

12. How Demand and Supply Establish Price Price Equilibrium Price Equilibrium The price at which demand and supply are equal. Elasticity of Demand Consumers’ responsiveness or sensitivity to changes in price.

13. Price Equilibrium

14. Elasticity of Demand Elastic Demand  Consumers buy more or less of a product when the price changes. Inelastic Demand  An increase or decrease in price will not significantly affect demand. Unitary Elasticity  An increase in sales exactly offsets a decrease in prices, and revenue is unchanged.

15. Evaluating a Customer’s Price Sensitivity Are there substitute ways of meeting a need? Is it easy to compare prices? Who pays the bill? How great is the total expenditure? How significant is the end benefit? Is there already a sunk investment related to the purchase?

16. Yield management Systems A technique for adjusting prices that uses complex mathematical software to profitably fill unused capacity

17. Yield Management Systems Options include: Discounting early purchases Limiting early sales at discounted prices Overbooking capacity

18. Varies with changes in level of output Varies with changes in level of output Types of Costs Variable Cost Variable Cost Fixed Cost Does not change as level of output changes Does not change as level of output changes The Cost Determinant of Price

19. Break-Even Pricing Break-Even Pricing Profit Maximization Pricing Keystoning Markup pricing Methods Used to Set Prices Methods Used to Set Prices

20. Break-Even Pricing

21. Other Determinants of Price Stage of the product life cycle Competition Distribution Strategy Promotion Strategy Perceived Quality

22. The Impact of the Internet Product Selection Shopping Bots Internet Auctions