PricingPricing

Chapter 19Chapter 19

PricingPricing

PricePrice BarterBarter Price equationPrice equation

What is Value?What is Value?

Value= Perceived benefits/priceValue= Perceived benefits/price Value-pricingValue-pricing

Do higher prices= Better products?Do higher prices= Better products?

Profit= Total Revenue- Total CostProfit= Total Revenue- Total Cost

Pricing ProcessPricing Process

Identify Pricing Constraints

Estimate Remand and Revenue

Determine Cost, Volume, & Profit Relationships

Select an Approximate Price Level

Set List/Quote Price

Make Special Adjustments to List/Quoted Price

Step 1: Identify Pricing Step 1: Identify Pricing ConstraintsConstraints

Pricing ConstraintsPricing Constraints DemandDemand NewnessNewness Single product v. Product LineSingle product v. Product Line Production and Promotion CostsProduction and Promotion Costs Costs of Changing PricesCosts of Changing Prices Type of Competitive MarketsType of Competitive Markets Competitors’ PricesCompetitors’ Prices

Step 1: Pricing ObjectivesStep 1: Pricing Objectives

ProfitProfit SalesSales Market ShareMarket Share Unit VolumeUnit Volume SurvivalSurvival Social ResponsibilitySocial Responsibility

Step 2: Estimate Demand and Step 2: Estimate Demand and RevenueRevenue

DemandDemand Demand factorsDemand factors

Estimating RevenueEstimating Revenue Total RevenueTotal Revenue Average RevenueAverage Revenue Marginal RevenueMarginal Revenue Price ElasticityPrice Elasticity

Step 3: Determine Cost, Value, Step 3: Determine Cost, Value, and Profit Relationsand Profit Relations

CostsCosts Total costTotal cost Fixed costFixed cost Variable CostVariable Cost Marginal CostMarginal Cost

Break-even AnalysisBreak-even Analysis