chapter day 19 bus 222. agenda questions? assignment 5 graded – 5 a’s, 6 b’s, 4 c’s and 2...
TRANSCRIPT
CHAPTER
Day 19
BUS 222
Agenda
• Questions?• Assignment 5 graded
– 5 A’s, 6 B’s, 4 C’s and 2 F’s
• Assignment 6 Posted– Due April 19 @ 9:30 AM
• Quiz 4 Corrected – 6 A’s,5 B’s, 4 C’s, 1 D And 1 F – 3 more quizes
• Discuss pricing Concepts for Establishing Value
5 Week Countdown
• April 12– Chap 14
• April 16– Chap 15– Quiz 5 (13 & 14)
• April 19– Assignment 6 Due– Chap 15
• April 23– Chap 16
• April 26– Quiz 6 (15 & 16)– Chap 17
• April 30– Chap 18
• May 3– Scholars Symposium
• May 7– Chap 19– Assignment 7 Due
• May 10– Quiz 7 (17, 18 & 19)
• May 14 @ 8 AM– Market Plan Presentations
• May 16 @ 3 PM– Complete Marketing Plans Due
CHAPTER
PRICING CONCEPTS FOR ESTABLISHING VALUE
13
McGraw-Hill/Irwin Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.
LEARNING OBJECTIVES
Pricing Concepts for Establishing Value
LO1 List the four pricing orientations.LO2 Explain the relationship between
price and quantity sold.LO3 Explain price elasticity.LO4 Describe how to calculate a
product’s break-even point.LO5 Indicate the four types of price
competitive levels.
Which is the best Wine?
$40
$70 $22
Price and Value
What’s the most you will pay for a nice hotel?
©Uden Graham/Redlink/Corbis
Price
Bottled vs. Tap Water
Price is a Signal
http://www.PriceGrabber.com
Website
©Brand X Pictures/PunchStock
The Role of Price in the Marketing Mix
Price is the only marketing mix element that generates revenue
Price is the only marketing mix element that generates revenue
Price is usually ranked as one of the most important factors in purchase decisions
Price is usually ranked as one of the most important factors in purchase decisions
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The 5 C’s of Pricing
1st C: Company Objectives
Profit Orientation
Sales Orientation
Competitor Orientation
• Competitive parity• Status quo pricing• Value is not part of this pricing strategy
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Focus on customer expectations by matching prices to customer expectations
Focus on customer expectations by matching prices to customer expectations
Customer Orientation
C Borland/PhotoLink/Getty Images Don Farrall/Getty Images
What are they trying to accomplish with this ad?
http://www.zipcar.com/
2nd C: Customers
Demand Curves and Pricing
Knowing demand curve enables to see
relationship between price and demand
Photo by Simon Frederick/Getty Images
Name the price?
$89.95
$199.95
$399.95
$799.95
$1795.95
$3795.95
http://www.woodlandcreekfurniture.com/graphics/SB04032.pdf
Demand Curves
Price Elasticity of Demand
©PhotoLink/Getty Images
Price Elasticity of Demand
©Dennis MacDonald/PhotoEdit, Inc. ©Bill Aron/PhotoEdit, Inc.
Factors Influencing Price Elasticity of Demand
Wal-Mart Commercial
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
BananaStock/JupiterImages
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
Getty Images/Digital Vision
3rd C: Costs
• Variable Costs– Vary with production volume
• Fixed Costs– Unaffected by production
volume
• Total Cost– Sum of variable and fixed
costs
Michael Rosenfeld/Stone/Getty Images
Break Even Analysis and Decision Making
BE Chart.xlsx
Break Even AnalysisTotal Variable Cost = Variable Cost per unit X Quantity
Total Cost = Fixed Cost + Total Variable CostTotal Revenue = Price X Quantity
Fixed CostsContribution per unit
Break-Even Point (units) =
Example: Fixed Cost = 100, Variable Cost = 2, Unit Price = 7
Contribution per unit = Unit Price – Variable Cost = 7 – 2 = 5
Break even Point = 100 / 5 = 20
Total revenue = 20 * 7 = 140 BE Chart.xlsx
4th C: Competition
Subway Commercial
Wal-Mart vs. Target
5th C: Channel Members
• Manufacturers, wholesalers and retailers can have different perspectives on pricing strategies
• Manufactures must protect against gray market transactions
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?
Macro Influences on Pricing
• The Internet• Increased price
sensitivity• Growth of online
auctions
Ryan McVay/Getty Images
Economic Factors
1. How have the Internet and economic factors affected the way people react to prices?
Check Yourself