Chapter 11 - Chapter 11 Pricing the Product Price the...

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Chapter 11- Pricing the Product Price – the assignment of value or the amount a consumer must exchange to receive the offering o Value- marketing is the process that creates exchanges of things of value o Opportunity cost- the value of something that is given up to obtain something else Steps in Pricing Step 1 : Develop Pricing Objectives o Sales or Market Share Objectives – lowering prices is not always necessary to increase market share just need competitive advantage o Profit – set price to yield a target profit of $200,000 or set prices to allow for an 8 percent profit margin on all goods sold o Competitive effect – alter pricing first quarter to increase sales during competitors intro of new product or maintain low end pricing policies to discourage new competitors from entering market o Customer satisfaction – simplify pricing to simplify decision process for customers or alter price levels to match customer expectations o Image enhancement - alter pricing policies to reflect the increased emphasis on the product’s quality image Prestige products- products that have a high price and that appeal to status –conscious consumers Step 2 : Estimate Demand o Demand Curves Law of demand- decrease prices customers will buy more Prestige products – increase in price like with jewelry instigates increase in demand Shifts in Demand External factors can play into laws of demand – advertising and other things may play into how much of a product sells Estimating Demand
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Predict total demand by: o Identifying the number of buyers or potential buyers for their product o multiplying that estimate times the average amount each member of the target market is likely to purchase o Price Elasticity of Demand- the percentage change in unit sales that results from a percentage change in price. Elastic demand- demand in which changes in price have large effects on the amount demanded Inelastic demand- demand in which changes in price have little or no effect on the amount demanded Price elasticity of demand = percentage change in quantity demanded/percentage change in price Elasticity of demand for a product often differs for different price levels and with different percentages of change Actual price elasticity is determined only after they have tested a pricing decision and calculated the resulting demand ten they will know Cross-elasticity of demand-
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Chapter 11 - Chapter 11 Pricing the Product Price the...

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