Ch16_NE - Setting the Right Price Chapter 16 Prepared by...

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Prepared by Deborah Baker Prepared by Deborah Baker Texas Christian University Texas Christian University Canadian Adaptation by Miguel Morales Canadian Adaptation by Miguel Morales Saint Mary’s University Saint Mary’s University COPYRIGHT  ©  2006 by Nelson, a division of Thomson Canada Limited. All rights reserved  Setting the Right Price Chapter 16
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2 COPYRIGHT  ©  2006 by Nelson, a division of Thomson Canada Limited. All rights reserved  Learning Objectives 1. Describe the procedure for setting the right price. 2.  Identify the legal and ethical  constraints  on pricing decisions. 3.  Explain how discounts, geographic  pricing, and other special pricing  tactics can be used to fine-tune the  base price.
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3 COPYRIGHT  ©  2006 by Nelson, a division of Thomson Canada Limited. All rights reserved  Learning Objectives (continued) 4.  Discuss product line pricing. 5.  Describe the role of pricing during  periods of inflation and recession.
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4 COPYRIGHT  ©  2006 by Nelson, a division of Thomson Canada Limited. All rights reserved  Steps in Setting the Right Price Results lead to the right price Fine tune with pricing tactics Choose a price strategy Estimate demand, costs, and profits Establish pricing goals Exhibit 16.1
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5 COPYRIGHT  ©  2006 by Nelson, a division of Thomson Canada Limited. All rights reserved  Pricing Objectives Profit-Oriented Pricing Objectives Sales-Oriented Pricing Objectives Status Quo Pricing Objectives
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6 COPYRIGHT  ©  2006 by Nelson, a division of Thomson Canada Limited. All rights reserved  Estimate Demand, Costs, and  Profits Estimate total revenue at a variety of prices. Determine corresponding costs for each  price. Estimate how much profit, if any, and  market share at each possible price. 
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7 COPYRIGHT  ©  2006 by Nelson, a division of Thomson Canada Limited. All rights reserved  Price Strategy A basic, long-term pricing  framework, which establishes the  initial price for a product and the  intended direction for  price movements over the product life  cycle.
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8 COPYRIGHT  ©  2006 by Nelson, a division of Thomson Canada Limited. All rights reserved  Choosing a Price Strategy Basic Strategies for Setting Prices Status Quo Pricing  Price Skimming Penetration Pricing
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9 COPYRIGHT  ©  2006 by Nelson, a division of Thomson Canada Limited. All rights reserved  Blocked Entry to Competitors Technological Breakthrough Legal Protection of Product Unique Advantages/Superior Inelastic Demand Situations when Price Skimming Is Successful Price Skimming
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