Lecture M: Marketing (4/e) - Chapter 14: Pricing concepts for establishing value

Chapter 14: Pricing concepts for establishing value. In this chapter you will learn: List the four pricing orientations, explain the relationship between price and quantity sold, explain price elasticity, describe how to calculate a product’s break-even point, indicate the four types of price competitive levels,...

value

fourteen

LO 14-1 List the four pricing orientations.

LO 14-2 Explain the relationship between price and quantity

sold.

LO 14-3 Explain price elasticity.

LO 14-4 Describe how to calculate a product’s break-even

point.

LO 14-5 Indicate the four types of price competitive levels.

LO 14-6 Describe the difference between an everyday low

price strategy (EDLP) and a high/low strategy.

LO 14-7 Explain the difference between a price skimming and a

market penetration pricing strategy.

LO 14-8 List pricing practices that have the potential to deceive

customers.

The 5 C’s of Pricing

provide for at least an 18 percent profit margin to reach a particular profit goal for the firm.

away from competitors, even if profits suffer.

market, set prices very low.

a particular product benefit and set prices relatively high (referred to as premium pricing).

provide for at least an 18 percent profit margin to reach a particular profit goal for the firm.

Profit Orientation

Sales Orientation

• Competitive parity

• Status quo pricing

• Value is not part of this pricing strategy

2nd C: Customers

Demand Curves

©PhotoLink/Getty Images

Price Elasticity of Demand

Walmart Commercial

Decision Making

4th C: Competition

• Manufacturers, wholesalers and retailers can have different perspectives

on pricing strategies

protect against gray market transactions

check yourself



• What are the five Cs of pricing?

• Identify the four types of company

objectives

• What is the difference between elastic

versus inelastic demand?

point in units?

New Product Pricing Strategies

check yourself



high/low pricing

• What is the difference between a market

penetration pricing strategy and a price

skimming pricing strategy?

Legal Aspects and Ethics of Pricing

check yourself



considered to be illegal or unethical?

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Break-even analysis enables managers to

examine the relationships among cost, price,

revenue, and profit over different levels of

production and sales

Glossary

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Cross-price elasticity is the percentage change

in the quantity of Product A demanded compared

with the percentage change in price in Product B

Glossary

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Fixed costs are those costs that remain

essentially at the same level, regardless of any

changes in the volume of production

Glossary

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Income effect is the change in the quantity of a

product demanded by consumers due to a

change in their income

Glossary

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The maximizing profits strategy assumes that if

a firm can accurately specify a mathematical

model that captures all the factors required to

explain and predict sales and profits, it should be

able to identify the price at which its profits are

maximized

Glossary

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Price is the overall sacrifice a consumer is willing

to make to acquire a specific product or service

Glossary

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The substitution effect refers to consumers’

ability to substitute other products for the focal

brand

Glossary

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Target profit pricing is implemented by firms to

meet a targeted profit objective The firms use

price to stimulate a certain level of sales at a

certain profit per unit

Glossary

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Target return pricing occurs when firms employ

pricing strategies designed to produce a specific

return on their investment, usually expressed as a percentage of sales

Glossary

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A cumulative quantity discount uses the

amount purchased over a specified time period

and usually involves several transactions

Glossary

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Horizontal price fixing occurs when competitors

that produce and sell competing products collude,

or work together, to control prices, effectively

taking price out of the decision process for

consumers

Glossary

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Price skimming is a strategy that occurs in many

markets, and particularly for new and innovative

products or services, and involves consumers

being willing to pay a higher price to obtain the

new product or service

Glossary

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A reference price is the price against which

buyers compare the actual selling price of the

product and that facilitates their evaluation

process

Glossary

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With a uniform delivered pricing tactic, the

shipper charges one rate, no matter where the

buyer is located

Glossary

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Vertical price fixing occurs when parties at

different levels of the same marketing channel

collude to control the prices passed on to

consumers

Glossary