1. Since GM*= (P*-VC)/P* =-1/e,
Quantity
Demanded
Price Charged *
MWB(uy)
MWP(ay)
Variable Cost (VC)
Two observations on the price-quantity demand schedule
Example of a Linear Price-Quantity Demand Function
The Optimal price is the mid point between the Maximum Willingness to pay and Variable Cost of the Product
Price elasticity
Gross Margin
-1.5
67% -2
50% -3
33% -4
25%
GM* = -1/e
Where, GM*, (gross margin*) indicates the gross margin at the optimal price and e = the elasticity of demand.
Since GM*= (P*-VC)/P* =-1/e,
11/27/2018
Paul Farris

2. Pricing Principles
Cost
Value
Competition
11/27/2018
Paul Farris

3. Product Life Cycle Clay Christensen
Features, technologies
Quality, reliability
Ease of use, convenience
Price
11/27/2018
Paul Farris

4. Summary
Cost, value, competition and sense of strategy over the product life cycle
One price will rarely do the job
Segmentation
Bundling
Selling through distributors
Pricing is a process that can be improved and innovated
11/27/2018
Paul Farris