Successfully reported this slideshow.
We use your LinkedIn profile and activity data to personalize ads and to show you more relevant ads. You can change your ad preferences anytime.

Chapter 13 MKT120 Pricing

2,136 views

Published on

Published in: Education
  • Login to see the comments

Chapter 13 MKT120 Pricing

  1. 1. © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
  2. 2. Learning Objectives LEARNING OBJECTIVES Why should firms pay more attention to setting prices? What is the relationship between price and quantity sold? Why is it important to know a product’s break-even point? Who wins in a price war? How has the Internet changed the way some people use price to make purchasing decisions? © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 13-2
  3. 3. Price and ValueWhat’s the most you will pay for a pair of jeans? © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 13-3
  4. 4. Price© McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 13-4
  5. 5. Price is a Signal PriceGrabber.com Website© McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 13-5
  6. 6. The Role of Price in the Marketing Mix Price is usually ranked as one of the most Price is usually ranked as one of the most important factors in purchase decisions important factors in purchase decisions Price is the only marketing mix element that Price is the only marketing mix element that generates revenue generates revenue © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 13-6
  7. 7. The 5 C’s of Pricing© McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 13-7
  8. 8. 1st C: Company Objectives© McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 13-8
  9. 9. Profit Orientation© McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 13-9
  10. 10. Sales Orientation© McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 13-10
  11. 11. Competitor Orientation Competitive parity Status quo pricing Value is not part of this pricing strategy © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 13-11
  12. 12. Customer Orientation =Focus on customer expectations by matchingFocus on customer expectations by matching prices to customer expectations prices to customer expectations automotive.com Website© McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 13-12
  13. 13. 2nd C: Customers© McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 13-13
  14. 14. Demand Curves and Pricing Knowing demand curve enables to seerelationship between price and demand © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 13-14
  15. 15. Demand Curves© McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 13-15
  16. 16. Price Elasticity of Demand Elastic (price sensitive) Inelastic (price insensitive) Consumers are less sensitive to price increases for necessities © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 13-16
  17. 17. 3rd C: Costs Variable Costs − Vary with production volume Fixed Costs − Unaffected by production volume Total Cost − Sum of variable and fixed costs © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 13-17
  18. 18. Break Even Analysis and Decision Making© McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 13-18
  19. 19. 4th C: Competition Subway Commercial© McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 13-19
  20. 20. 5th C: Channel Members  Manufacturers, wholesalers and retailers can have different perspectives on pricing strategies  Manufactures must protect against gray market transactions© McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 13-20
  21. 21. Macro Influences on Pricing The Internet Increased price sensitivity Growth of online auctions © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 13-21
  22. 22. Review Only© McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 13-22
  23. 23. Economic Factors© McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 13-23
  24. 24. What are they trying to accomplish with this ad? © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 13-24
  25. 25. Price Elasticity of Demand© McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 13-25
  26. 26. Factors Influencing Price Elasticity of Demand Wal-Mart Commercial© McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 13-26
  27. 27. Substitution Effect Meet Pete, college student on a budget: Old Spice Sport Deodorant user At the store he notices that Old Spice is more expensive Pete decides to give another brand a try and save money © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 13-27
  28. 28. Cross-Price Elasticity  Meet Kendra, self- supporting college student:  Buys a new printer on sale for a great price  Learns it requires special ink cartridges that cost more than the printer© McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 13-28
  29. 29. Break Even Analysis Total Variable Cost = Variable Cost per unit X Quantity Total Cost = Fixed Cost + Total Variable Cost Total Revenue = Price X Quantity Fixed CostsBreak-Even Point (units) = Contribution per unit © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 13-29
  30. 30. Check Yourself 1. What are the five Cs of pricing? 2. Identify the four types of company objectives. 3. What is the difference between elastic versus inelastic demand? 4. How does one calculate the break-even point in units?© McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 13-30
  31. 31. Check Yourself 1. How have the Internet and economic factors affected the way people react to prices?© McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 13-31
  32. 32. GlossaryBreak-even analysis enables managers to examine the relationships among cost, price, revenue, and profit over different levels of production and sales. Return to slide © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 13-32
  33. 33. GlossaryCross-price elasticity is the percentage change in the quantity of Product A demanded compared with the percentage change in price in Product B. Return to slide © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 13-33
  34. 34. GlossaryFixed costs are those costs that remain essentially at the same level, regardless of any changes in the volume of production. Return to slide © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 13-34
  35. 35. GlossaryIncome effect is the change in the quantity of a product demanded by consumers due to a change in their income. Return to slide © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 13-35
  36. 36. GlossaryThe maximizing profits strategy assumes that if a firm can accurately specify a mathematical model that captures all the factors required to explain and predict sales and profits, it should be able to identify the price at which its profits are maximized. Return to slide © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 13-36
  37. 37. GlossaryPrice is the overall sacrifice a consumer is willing to make to acquire a specific product or service. Return to slide © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 13-37
  38. 38. GlossaryThe substitution effect refers to consumers’ ability to substitute other products for the focal brand. Return to slide © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 13-38
  39. 39. GlossaryTarget profit pricing is implemented by firms to meet a targeted profit objective. The firms use price to stimulate a certain level of sales at a certain profit per unit. Return to slide © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 13-39
  40. 40. GlossaryTarget return pricing occurs when firms employ pricing strategies designed to produce a specific return on their investment, usually expressed as a percentage of sales. Return to slide © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 13-40
  41. 41. GlossaryThe total cost is the sum of the variable and fixed costs. Return to slide © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 13-41
  42. 42. GlossaryVariable costs are the costs that vary with production value. Return to slide © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 13-42

×