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Unformatted text preview: AEM 2400 Prelim 3 notes Chapter 13: Building the Price Foundation. Jeff Fluhr and Eric Baker: Need a Ticket.com. actually turning the plan into reality wasnt as easy as the two entrepreneurs expected. StubHub. StubHub also has direct relationships with sports leagues so that the site can generate extra Internet websites have revolutionized pricing and efficiently connecting buyers and sellers. L01: Identify the elements that make up a price. - Words that can mean price: tuition, rent, interest, premium, fee, dues, fare, salary, commission, wage.- Price: the money or other considerations exchanged for the ownership or use of a good or service. - Barter: Practice of exchanging goods and services for other goods and services rather than for money.- Most products, money is exchanged. However, the amount paid is not always the same as the list price because of discounts, allowances, and extra fees.- Price equation o Final price =List price- (incentives +allowances) + extra fees. - Price as a indicator of value o Value is the ratio of perceived benefits to price, or Value =Perceived benefits/ Price o Value-pricing: the practice of simultaneously increasing product and service benefits while maintaining or decreasing price. For some products, price influences consumers perception of overall quality and ultimately its value to consumers. o Reference value- comparing the costs and benefits of substitute items. supersizing at fast-food restaurants. - Firms Profit equation: o Profit =total revenue-total cost o = (unit price x Quantity sold) ( Fixed cost +Variable cost) o What makes this relationship even more complicated is that price affects the quantity sold. - The importance of price in the marketing mix necessitates an understanding of six major steps in the process organizations go through in setting prices o Identify pricing objectives and constraint (step 1) Objectives like profit, market share, and survival Constraints like demand for product class and brand, newness, costs, and o Estimate demand and revenue (step 2) Demand estimation Sales revenue estimation Price elasticity estimation o Determine cost, volume, and profit relationships (Step 3) Cost estimation Marginal analysis, in relation to profit. Break-even analysis, in relation profit. o Select an approximate price level (step 4) o Set list or quoted price (step 5) o Make special adjustments to list or quoted price. (step 6) L02: Recognize the objectives a firm has in setting prices and the constraints that restrict the range of prices a firm can charge Identify pricing objectives and Constraints (step 3)...
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- Fall '07