View
215
Download
0
Category
Tags:
Preview:
Citation preview
© 2009 South-Western, Cengage LearningMARKETINGMARKETING
1
Chapter 14
DETERMININGDETERMININGTHE BEST PRICETHE BEST PRICE
14-1 The Economics of Price Decisions
14-2 Developing Pricing Procedures
14-3 Pricing Based on Market Conditions
CHAPTER
14
© 2009 South-Western, Cengage LearningMARKETINGMARKETINGChapter 14
2©
LEX
US
Focus Questions:What is the focus of the
advertisement for The Week?
What pricing strategy do you think is being used by offering an online publication free of charge?
How does this add value for the customer?
© 2009 South-Western, Cengage LearningMARKETINGMARKETINGChapter 14
3
THE ECONOMICS OF PRICE DECISIONS
GOALSGOALSExplain the reasons why price is an
important marketing tool.Demonstrate how the economic
concept of elasticity of demand relates to pricing decisions.
Describe the three primary ways in which government influences prices.
14-1
© 2009 South-Western, Cengage LearningMARKETINGMARKETINGChapter 14
4
Price as a Marketing Tool
The importance of priceWhat is price?Price adjustability
© 2009 South-Western, Cengage LearningMARKETINGMARKETINGChapter 14
5
Price as an Economic Concept
Economic utilityElasticity of demand
© 2009 South-Western, Cengage LearningMARKETINGMARKETINGChapter 14
6
Supply and Demand Affect Price
At a price of $3, demand (90) is greater than supply (30).
At a price of $7, supply (90) is greater than demand (30).
At a price of $5, supply equals demand (60), and the market is in equilibrium.
© 2009 South-Western, Cengage LearningMARKETINGMARKETINGChapter 14
7
Inelastic Demand
Price of a Dozen Eggs Quantity Sold Total Revenue
$0.65 305 $198.25
$0.68 300 $204.00
$0.71 292 $207.32
$0.74 285 $210.90
$0.77 277 $213.29
$0.80 264 $211.20
© 2009 South-Western, Cengage LearningMARKETINGMARKETINGChapter 14
8
Elastic Demand
Price of a Gallon of Ice Cream Quantity Sold Total Revenue
$3.65 180 $657.00
$3.70 165 $610.50
$3.75 158 $592.50
$3.80 147 $558.60
$3.85 136 $523.60
$3.90 122 $475.80
© 2009 South-Western, Cengage LearningMARKETINGMARKETINGChapter 14
9
Government’s Effect on Prices
Regulating competitionRegulating pricesTaxation
© 2009 South-Western, Cengage LearningMARKETINGMARKETINGChapter 14
10
DEVELOPING PRICING PROCEDURES
GOALSGOALSDescribe common pricing objectives for
businesses.Explain how businesses establish a price
range for a product.Identify the three components that must be
considered when determining the selling price.
14-2
© 2009 South-Western, Cengage LearningMARKETINGMARKETINGChapter 14
11
Setting Price Objectives
Maximize profitsIncrease salesMaintain an image
© 2009 South-Western, Cengage LearningMARKETINGMARKETINGChapter 14
12
Determining a Price Range
Maximum priceMinimum priceBreakeven analysisPrice range
© 2009 South-Western, Cengage LearningMARKETINGMARKETINGChapter 14
13
Breakeven Analysis forAscroe Garden Weeder
Variable TotalUnits Costs Variable Fixed Total TotalSold per Unit Costs + Costs = Costs Price Revenue
5,522 $2.80 $15,462 + $85,000 = $100,462 $14 $77,3086,054 $2.80 $16,951 + $85,000 = $101,951 $14 $84,7566,998 $2.80 $19,594 + $85,000 = $104,594 $14 $97,9727,589 $2.80 $21,249 + $85,000 = $106,249 $14 $106,2468,225 $2.80 $23,030 + $85,000 = $108,030 $14 $115,1509,110 $2.80 $25,508 + $85,000 = $110,508 $14 $127,540
© 2009 South-Western, Cengage LearningMARKETINGMARKETINGChapter 14
14
Breakevenpoint
Breakeven point
Breakeven Point
7,589 units
=
85,000 85,000
14.00 – 2.80 11.20== =
Total fixed cost
Price – Variable costs per unit
© 2009 South-Western, Cengage LearningMARKETINGMARKETINGChapter 14
15
Price Range for a Pair of Shoes
Total cost
$87.00
$53.00
$38.00
Price range
Highest price customer will pay
Lowest price company
can chargeVariable costs per pair
Fixed costsper pair
© 2009 South-Western, Cengage LearningMARKETINGMARKETINGChapter 14
16
Calculating a Selling Price
Gross marginOperating expensesNet profitMarkupMarkdown
© 2009 South-Western, Cengage LearningMARKETINGMARKETINGChapter 14
17
Components of the Selling Price
Product costOperating expensesNet profit
© 2009 South-Western, Cengage LearningMARKETINGMARKETINGChapter 14
18
PRICING BASED ONMARKET CONDITIONS
GOALSGOALSIdentify two marketing tools that illuminate
competitive conditions and help marketers set prices.
Describe the various criteria businesses use in establishing the final price a customer pays.
Explain why extending and managing credit is an important part of marketing.
14-3
© 2009 South-Western, Cengage LearningMARKETINGMARKETINGChapter 14
19
Competitive Environment
Product life cycleConsumer purchase classificationsNon-price competition
© 2009 South-Western, Cengage LearningMARKETINGMARKETINGChapter 14
20
Pricing Strategies
Price flexibilityOne-price policyFlexible pricing policy
Price linesGeographic pricing
FOB pricingZone pricing
Discounts and allowancesAdded values
© 2009 South-Western, Cengage LearningMARKETINGMARKETINGChapter 14
21
Discounts and Allowances
Quantity discountSeasonal discountCash discountTrade discount
Trade-in allowanceAdvertising allowanceCouponRebate
© 2009 South-Western, Cengage LearningMARKETINGMARKETINGChapter 14
22
Offering Credit
Types of creditConsumer creditTrade credit
Developing credit proceduresCredit policiesCredit approvalCollections
Recommended