Price = Sacrifice - PowerPoint PPT Presentation

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Price = Sacrifice

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  1. NBC_bottled_water_vs_tap384K_Stream.wmv Price = Sacrifice

  2. Price is a Signal

  3. The 5 C’s of Pricing

  4. 1st C: Company Objectives Exhibit 13.2: Company Objectives and Pricing Strategy Implications Company Objective Examples of Pricing Strategy Implications Institute a companywide policy that all products must provide for at least an 18 percent profit margin to reach a particular profit goal for the firm Profit Oriented Set prices very low to generate new sales and take sales away from competitors even if profits suffer Sales Oriented To discourage more competitors from entering the market set prices very low Competitor Oriented Customer Oriented Target a market segment of consumers who highly value a particular product benefit and set prices relatively high (referred to as premium pricing)

  5. Pricing Strategies • Penetration Pricing • Set low initially • Build market share • Keep out competition Cross Price Elasticity Percentage change in the quantity of Product A demanded compared with the percentage change in price in Product B • Price Skimming • Set high initially • New and innovative products – innovator segment Everyday Low Prices (EDLP) Saves search costs High/Low Pricing Thrill of chase for lowest price Clip 14

  6. 1. Company Objectives: Profit Orientation

  7. 1. Company Objectives: Sales Orientation

  8. 1. Company Objectives:Competitor Orientation • Competitive parity • Status quo pricing • Value is not part of this pricing strategy

  9. 1. Company Objectives: Customer Orientation = Focus on customer expectations • Reference Price • comparison • facilitates evaluation http://www.automotive.com/gas-prices/32/oklahoma/cleveland/

  10. 2nd C: Customers

  11. Demand Curves

  12. Price Elasticity of Demand Measures how changes in a price affect the quantity of the product demanded The ratio of the percentage change in quantity demanded to the percentage change in price Price Elasticity of Demand = % Change in Quantity Demanded % Change in Price Elastic – Price Sensitive Inelastic – Price Insensitive

  13. 3rd C: Costs • Variable Costs • Vary with production volume • Fixed Costs • Unaffected by production volume • Total Cost • Sum of variable and fixed costs

  14. Break Even Analysis and Decision Making

  15. 4th C: Competition Less Price Competition More Price Competition Monopoly One firm controls the market Oligopoly A handful of firms control the market Fewer Firms Monopolistic Competition Many firms selling differentiated products at different prices Pure Competition Many firms selling commodities for the same price Many Firms

  16. 5th C: Channel Members Manufacturers, wholesalers and retailers can have different perspectives on pricing strategies Manufactures must protect against gray market transactions