8. Pricing Considerations PRICE SENSITIVITY Price Quantity Demanded per Period A. Inelastic Demand - Demand hardly changes with a small change in price P 2 P 1 Q 1 Q 2 Price Quantity Demanded per Period P 2 P 1 Q 1 Q 2 B. Elastic Demand - Demand changes greatly with a small change in price
9. Product-Based Pricing Approaches Product Line Pricing Setting price steps between product line items i.e. $299, $399 Optional-Product Pricing Pricing optional or accessory products sold with the main product *** i.e. car options Captive-Product Pricing Pricing products that must be used with the main Product***i.e. Razor Blades, Film, Software By-Product Pricing Pricing low-value by-products to get rid of them ***i.e. Lumber Mills, Zoos Product-Bundle Pricing Pricing bundles Of products sold together ***i.e. season tickets, computer makers Source: Prentice Hall
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15. Cost-Based Pricing COST-PLUS Minimizes price competition Perceived fairness for both buyers and sellers Sellers are more certain about costs than demand
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29. Customer Considerations VALUE PRICING Cost-Based Pricing Value-Based Pricing Source: Prentice Hall Product Cost Price Value Customers Customer Value Price Cost Product