Pricing concepts
Download
1 / 18

Pricing Concepts - PowerPoint PPT Presentation


  • 115 Views
  • Uploaded on

17. Pricing Concepts. Prepared by Deborah Baker Texas Christian University. Learning Objectives. 1. Discuss the importance of pricing decisions to the economy and to the individual firm 2. List and explain a variety of pricing objectives

loader
I am the owner, or an agent authorized to act on behalf of the owner, of the copyrighted work described.
capcha
Download Presentation

PowerPoint Slideshow about 'Pricing Concepts' - beryl


An Image/Link below is provided (as is) to download presentation

Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.


- - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - -
Presentation Transcript
Pricing concepts

17

Pricing Concepts

Prepared by

Deborah Baker

Texas Christian University


Learning objectives
Learning Objectives

1. Discuss the importance of pricing decisions to the economy and to the individual firm

2. List and explain a variety of pricing objectives

3. Explain the role of demand in price determination


Learning objectives continued
Learning Objectives (continued)

4. Understand the concept of yield management systems

5. Describe cost-oriented pricing strategies

6. Demonstrate how the product life cycle, competition, distribution and promotion strategies, customer demands, the Internet and extranets, and perceptions of quality can affect price


The importance of price

Revenue = Unit Price  Number of units sold

  • Revenue pays for every activity.

  • What’s left over is Profit.

The Importance of Price

Price

=

Perceived Value

Low Price

High Price

1


Profit oriented pricing objectives

Profit-Oriented Pricing Objectives

Profit-Oriented Pricing Objectives

Profit

Maximization

SatisfactoryProfits

Target Return on

Investment

2


Sales oriented pricing objectives

Sales-Oriented Pricing Objectives

Market

Share

Sales

Maximization

Sales-Oriented Pricing Objectives

2


Status quo pricing objectives

Status Quo Pricing Objectives

Maintain

existing

prices

Meet

competition’s

prices

Status Quo Pricing Objectives

Online

http://www.target.com

http://www.walmart.com

http://www.jcpenney.com

2


Demand and supply

Demand

The quantity of a product that will be sold in the market at various prices for a specified period.

Supply

The quantity of a product

that will be offered to the market

by a supplier at various prices for a specific period.

Demand and Supply

Online

http://www.uBid.com

3


Elasticity of demand

Elastic Demand

  • Consumers buy more or lessof a product when the price changes

InelasticDemand

  • An increase or decrease in price will not significantly affect demand

UnitaryElasticity

  • An increase in sales exactly offsets a decrease in prices, and revenue is unchanged

Elasticity of Demand

3


Factors that affect elasticity of demand

Availability of substitutes

Price relative to

purchasing power

Product durability

A product’s other uses

Factors that Affect Elasticity of Demand

Online

http://www.columbiahouse.com

3


Yield management systems price adjustments

Discounting early purchases

Limiting early sales at discounted prices

Overbooking capacity

Yield Management Systems Price Adjustments

4


The cost determinant of price
The Cost Determinant of Price

Types of Costs

Variable

Costs

Fixed Costs

5


The cost determinant of price1

Markup pricing

Methods

Used to

Set Prices

Keystoning

Profit Maximization Pricing

Break-Even

Pricing

Target-Return

Pricing

The Cost Determinant of Price

5


Markup pricing
Markup Pricing

Markup

Pricing

Keystoning

5


Profit maximization
Profit Maximization

Profit

Maximization

Marginal

Revenue

5


Break even pricing

Total Revenue

Profit

Total Costs

4,000

Break-even point

Price

Loss

2,000

Fixed costs

3,000

4,000

5,000

6,000

0

1,000

2,000

Quantity

Break-Even Pricing

5


Other determinants of price

Stages of the

Product Life Cycle

Competition

Distribution Strategy

Promotion Strategy

Perceived Quality

Other Determinants of Price

6


Regaining price control

Exclusive distribution system

Franchising

Avoid business with price-cutting discounters

Package marked with selling price

Place goods on consignment

Deliver quality and value

Regaining Price Control

6