Fall Ch13 Notes - Ch.13PricingConcepts Internal/...

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Ch. 13 - Pricing Concepts  Internal/External Factors of Price  Pricing Objectives  Elasticity  Cost-based Pricing
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Ch. 13 - Pricing Concepts New Product Pricing Methods of Pricing Product Mix Pricing Strategies Price Adjustment Strategies
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What is Price? $ - what you pay for  something or… The   value      that you  exchange for the benefits  of having or using the  product/service (i.e. time,  psychological costs, other  resources) Value = Benefits - Service  Benefits Brand  Benefits Product  Benefits Price & Other Costs Value
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Internal Factors of Price 1. Marketing Objectives to   maximize profit to gain   market share to infer a level of  quality   to survive
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Internal Factors of Price 2. Marketing Mix Strategy price needs to be consistent with other  3P’s (needs to reflect advertising, etc.) Eg. Low price 3. Costs your costs affect your profit, so set the  optimal price Eg. Plastic(put into)
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External Factors of Price 1. Demand for your product 2. Competition Competitor’s prices Strength of competition 3. Economy Cost of components (natural resources) Economic conditions
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Status Quo maintaining price meeting competitions price Profit -Oriented profit maximization satisfactory profits return on investment Pricing  Objectives Sales -Oriented market share sales maximization
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Price Elasticity Tells us how much the demand for a  product will change with a change in  price % CHANGE IN  Quantity  Demand  of good “A”    % CHANGE in  PRICE   of good “A”    E =
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Factors That Affect Elasticity Availability of  Substitutes Price relative to purchasing power Product durability A product’s other uses
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Elasticity of Demand Elastic Elastic Demand Demand Elastic Elastic Demand Demand Consumers buy more or less of a product when the price changes Inelastic Inelastic Demand Demand Inelastic Inelastic Demand Demand An increase or decrease in price will not significantly affect demand Unitary Unitary Elasticity Elasticity Unitary Unitary Elasticity Elasticity An increase in sales exactly offsets a decrease in prices, and revenue is unchanged
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Elasticity of Demand Price Goes... Price Goes... Revenue Goes... Revenue Goes... Demand is... Demand is... Down Up inelastic Down Down elastic Up Up elastic Up Down inelastic Up or Down Stays the Same unitary
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Inelastic Demand If demand hardly changes with a price  change, the demand is inelastic This describes products that are less  price-sensitive and have  very few  substitutes Ex:  Cigarettes, medicine, gasoline ASU demand—inelastic component collectively.  
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Inelastic Demand Relatively  Inelastic Quantity Price Demand A relatively large increase in price results in only a small decrease in quantity demanded.
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