Market factors affecting price @ ppt doms

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Market factors affecting price @ ppt doms

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Market factors affecting price @ ppt doms

  1. 1. Market Factors Affecting Price
  2. 2. Objectives <ul><li>Define Price and Pricing </li></ul><ul><li>List the four market factors that affect price </li></ul><ul><li>Identify and discuss each market factor </li></ul><ul><li>Define elastic demand and inelastic demand </li></ul><ul><li>List the 5 factors that contribute to demand elasticity </li></ul><ul><li>Identify and discuss each factor </li></ul>
  3. 3. Price & Pricing <ul><li>Price : the money a customer must pay for a product or service. </li></ul><ul><ul><li>Part of the Marketing Mix </li></ul></ul><ul><li>Pricing: establishing and communicating the value of products and services to potential customers. </li></ul>
  4. 4. Four Major Market Factors That Affect Price <ul><li>Costs and Expenses </li></ul><ul><li>Supply and Demand </li></ul><ul><li>Consumer Perceptions </li></ul><ul><li>Competition </li></ul>
  5. 5. 1. Costs and Expenses <ul><li>Sales + Costs + Expenses = Profit </li></ul><ul><li>Increasing costs and expenses lead companies to: </li></ul><ul><ul><li>Increase price of product or service </li></ul></ul><ul><ul><li>Reduce size of product or service </li></ul></ul><ul><ul><li>Drop service that is not valued </li></ul></ul><ul><ul><li>Add to their product or service </li></ul></ul>
  6. 6. 1. Costs and Expenses <ul><li>Lower costs and expenses lead companies to: </li></ul><ul><ul><li>Decrease prices of products and services </li></ul></ul><ul><li>Improved technology and less expensive materials help companies produce better-quality products at lower prices. </li></ul><ul><ul><li>Example: the price of computers </li></ul></ul>
  7. 7. 2. Supply and Demand <ul><li>With most products: </li></ul><ul><ul><li>Demand increases with lower prices </li></ul></ul><ul><ul><li>Demand decreases with higher prices </li></ul></ul><ul><li>This does not apply to some products </li></ul><ul><li>Demand Elasticity </li></ul><ul><ul><li>The degree to which demand for a product is affected by its price </li></ul></ul><ul><li>Products have either elastic or inelastic demand </li></ul>
  8. 8. Elastic Demand <ul><li>When a change in price creates a change in demand. </li></ul><ul><ul><li>Example: Price of Steak </li></ul></ul><ul><li>Law of Diminishing Marginal Utility </li></ul><ul><ul><li>Consumers will only buy so much of a product even if the price is low. </li></ul></ul><ul><ul><li>Example: Price of Laundry Detergent </li></ul></ul>
  9. 9. Inelastic Demand <ul><li>When a change in price has very little effect on demand for a product </li></ul><ul><li>Example : </li></ul><ul><ul><li>Milk </li></ul></ul><ul><ul><li>Bread </li></ul></ul>
  10. 10. Demand Elasticity <ul><li>The demand elasticity depends on five factors: </li></ul><ul><ul><li>Brand Loyalty </li></ul></ul><ul><ul><li>Availability of Substitutes </li></ul></ul><ul><ul><li>Price Relative to Income </li></ul></ul><ul><ul><li>Luxury vs. Necessity </li></ul></ul><ul><ul><li>Urgency of Purchase . </li></ul></ul>
  11. 11. Brand Loyalty <ul><li>When a customer will not buy a substitute product over a brand name of their choice. </li></ul><ul><li>In this case brand is inelastic. </li></ul>
  12. 12. Availability of Substitutes <ul><li>When there are a variety of substitutes that will do the same job, the demand becomes elastic. </li></ul><ul><li>Example: </li></ul><ul><ul><li>Laundry Detergent </li></ul></ul>
  13. 13. Price Relative to Income <ul><li>If a price increases dramatically and it is beyond a customer’s budget, they are less likely to buy it. </li></ul><ul><li>In this situation the demand will be elastic. </li></ul><ul><li>Example: </li></ul><ul><ul><li>A diamond ring </li></ul></ul>
  14. 14. Luxury vs. Necessity <ul><li>When a consumer feels that a product is a necessity, the demand becomes inelastic. </li></ul><ul><li>Example: </li></ul><ul><ul><li>medicine </li></ul></ul><ul><li>When a consumer feels that a product is a luxury, the demand becomes elastic. </li></ul><ul><li>Example: </li></ul><ul><ul><li>automobile </li></ul></ul>
  15. 15. Urgency of Purchase <ul><li>If a purchase must be made immediately then the demand will be inelastic. </li></ul><ul><li>Example: </li></ul><ul><ul><li>Running out of gas </li></ul></ul>
  16. 16. 3. Consumer Perceptions <ul><li>Price planning involves what the consumers perceive </li></ul><ul><li>Some consumers associate quality with price </li></ul><ul><ul><li>High price equals high quality </li></ul></ul><ul><ul><li>High price equals status, prestige, and exclusiveness </li></ul></ul>
  17. 17. 3. Consumer Perceptions <ul><li>Businesses limit a supply on the market to make the consumer think that it is worth more. </li></ul><ul><li>Example: </li></ul><ul><ul><li>Limited Edition </li></ul></ul><ul><li>Personalized service can also add to a customer’s perception. </li></ul>
  18. 18. 4 . Competition <ul><li>2 Forms: </li></ul><ul><ul><li>Non-Price Competition </li></ul></ul><ul><ul><li>Price Competition </li></ul></ul><ul><li>Non-price competition minimizes price as a reason for purchase. The more unusual a product, the greater the freedom to set prices above those of competitors. </li></ul><ul><li>Price competition allows a company to gain target market appeal by lowering prices. </li></ul>
  19. 19. 4. Competition <ul><li>Companies are constantly watching each other. If one lowers their price, their competitors will lower their price too. </li></ul><ul><li>The benefit is lower prices for consumers. </li></ul><ul><li>Price Wars: </li></ul><ul><ul><li>When a company lowers their price to the point that they lose profits. Can cause financial trouble. </li></ul></ul>
  20. 20. Summary <ul><li>Defined Price and Pricing </li></ul><ul><li>Listed the four market factors that affect price </li></ul><ul><li>Identified and discussed each market factor </li></ul><ul><li>Defined elastic demand and inelastic demand </li></ul><ul><li>Listed the 5 factors that contribute to demand elasticity </li></ul><ul><li>Identified and discussed each factor </li></ul>

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