Pricing Fundamentals #1

Today I will: Learn the role value plays in pricing decisionsSo I can: Explain the goal of pricingI will know I’m successful when: I see the value of Pricing as one of the key components of the Marketing Mix

Price – the value in money (or its equivalent) placed on a good or service

Value = Anticipated Satisfaction

High anticipated satisfaction

Low anticipated satisfaction

Lower Price Higher Price

Return on Investment (ROI) – a calculation used to determine the relative profitability of a product

Rate of Return (also referred to as “profit margin”) = Profit ÷ InvestmentInvestment = $750Sales = $1,000Profit = $250$250 (profit) ÷ $750 (investment) = ROI of 33%

Question: Does higher price equal higher revenue?

Question: Does higher price equal higher revenue?

Price per item x Quantity Sold = Sales Revenue

$50 200 $10,000

$45 250 $11,250

$40 280 $11,200

$35 325 $11,375

$30 400 $12,000

$25 500 $12,500

What gain comes from this kind of pricing strategy?Market Share – a firm’s percentage of total sales volume generated by all competitors in a given market.Value? = long term Benefits via gaining more customers

Individual AssignmentWrite out on you note paper. Worth 3 points at end of unit. Be prepared to share when called on.1) Name a company where pricing is related to its image and

promotion of that image. Explain how they do this.2) Provide two examples of how businesses compete when not

competing on price.3) It costs $6.50 to manufacture, package and market a pair of flip-

flops. They sell for $10.00. What is the rate of return on investment?

4) Why may the price of a concert ticket vary depending on where the concert is held within the United States?