1. Basic Marketing – Chapter 18 Supplementary PowerPoint Archive
This is an archive of photos and exhibits from the text and additional graphics and exhibits as referenced in the Basic Marketing Multimedia Lecture Guides.
See the Basic Marketing Multimedia Lecture Support Package for additional detail and teaching suggestions.
For use only with Perreault/Cannon/McCarthy. These images may not be redistributed or used for any other purpose without permission of the publisher, McGraw-Hill/Irwin, The McGraw-Hill Companies, Inc.
William D. Perreault Jr. and E. Jerome McCarthy
For use only with Perreault/Cannon/McCarthy or Perreault/McCarthy texts. © 2009 McGraw-Hill Companies, Inc. McGraw-Hill/Irwin
For use only with Perreault and McCarthy texts. © 2005 McGraw-Hill Companies, Inc. McGraw-Hill/Irwin 1
Basic Marketing

2. Sony’s flat-panel TVs opening photo (p.484)

3. Exhibit 18-1: Price Setting and Strategy Planning (p.487)

4. Kohler and Splenda ads (p. 488)

5. Black and Decker cordless electric drill photo (p. 489)

6. Exhibit 18-2: Example of a Markup Chain and Channel Pricing (p.489)

7. EnergyTomorrow.org ad (p.490)

8. Exhibit 18-3: Results of Average-Cost Pricing (p.491)

9. Exhibit 18-4: Cost Structure of a Firm (p.493)

10. Exhibit 18-5: Typical Shape of Cost (per unit) Curves when Average Variable Cost per Unit is Constant (p.493)

11. Exhibit 18-6: Evaluation of Various Prices along a Firm’s Demand Curve (p.494)

12. Exhibit 18-7: Summary of Relationships among Quantity, Cost, and Price Using Cost-Oriented Pricing (p.494)

13. Exhibit 18-8: Break-Even Chart for a Particular Situation (p.497)

14. Gillette international photo (p. 498)

15. Exhibit 18-9: Revenue, Cost, and Profit at Different Prices for a Firm (p.499)

16. Note: profit area shown in green
Exhibit 18-10: Graphic Determination of the Price Giving the Greatest Total Profit for a Firm (p.500)
Note: profit area shown in green

17. Exhibit 18-11: Marginal Revenue Drops Fast in an Oligopoly (p.501)

18. Xerox ad (p.502)

19. Porsche ad (p.503)

20. Grasshopper ad (p. 504)

21. Kodak ad (p.506)

22. Benjamin Moore ad (p.506)

23. Exhibit 18-12: How Customers Reference Price Influences Perceived Value (for a marketing mix with a given set of benefits and costs) (p.506)

24. Exhibit 18-13: Demand Curve when Psychological Pricing is Appropriate (p.507)

25. Carino’s ad (p.508)

26. Exhibit 18-14: Demand Curve Showing a Prestige Pricing Situation (p

27. Cartier ad (p.508)

28. Paradigm ad (p.508)

29. Comcast ad (p.510)

30. Worldbid and Jaffe ads (p.511)

31. Wal-Mart photo

32. Key Factors that Influence Price Setting

33. Products may be marked up several times through the channel
Markups
Dollar amount added to the cost of the products to get the selling price
Markup percent is the percentage of selling price that is added to the cost to get the selling price
percent of selling price unless otherwise noted
Products may be marked up several times through the channel
the sequence of markups is the markup chain
High markups don't always mean high profits
depends on the stockturn rate

34. Alternative Example of a Markup Chain and Channel Pricing

35. Alternate Approach for Computing Channel Markups

36. Milk in supermarket stockturn photo

37. Adds a reasonable markup to the average cost of a product
Average-Cost Pricing
Adds a reasonable markup to the average cost of a product
Simplifies pricing
Quite common, especially among middlemen
Usually based on estimates or past records
actual average cost depends on quantity sold!
quantity sold depends on price

38. Cargill average cost ad

39. Experience Curve Pricing
A type of average-cost pricing that is not discussed in text, but uses an estimate of future average costs
Often leads to low prices if future economies of scale are expected
costs may drop with accumulated production experience
Can be very risky if costs do not drop, or if expected volume is not achieved

40. Can be modified to incorporate a target return Problems:
Break-Even Analysis
Used to evaluate whether the firm will be able to cover costs (break even) at a particular price
Indicates the break-even point—sales (units or dollars) needed to break even
Can be modified to incorporate a target return
Problems:
assumes any quantity can be sold at a given price
total cost curve is assumed to be a straight line

41. Break-Even Chart Example

42. Marginal Revenue and Price

43. A Plotting of the Demand and Marginal Revenue Data

44. Cost Structure for Individual Firm (fill in the missing numbers)

45. Cost Structure for Individual Firm (with missing numbers filled in)

46. Per-Unit Cost Curves (for Individual Firm)

47. Alternate Determination of the Most Profitable Output and Price for a Firm

48. Finding the Most Profitable (or least unprofitable) Price and Quantity in Pure Competition (in the short run)

49. Demand-Oriented Pricing Approaches
Evaluating a customer’s price sensitivity
Value in use pricing
Auctions
including online
sequential price reductions
Reference prices
Leader pricing
Bait pricing
Psychological pricing
odd-even pricing
price lining
Demand-backward pricing
Prestige pricing
Full-line pricing
complementary product pricing
product-bundle pricing

50. 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?
Are there switching costs?

51. Folgers Home Café Brewing System ad

52. Value in Use Pricing
Sets prices that will capture some of what customers will save by substituting the firm's product for the one the customer is currently using
Example: A construction firm that buys a new, more efficient bulldozer at a higher price might still save money on:
labor (operator) expenses
down-time for repairs
fuel consumption
maintenance costs

53. eCampus.com and Hallmark ads

54. Affordable Furniture ad

55. Rolex ad