Chapter 12 Notes

Chapter 12 Notes - Ch.12PricingConcepts Internal/...

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Ch. 12 - Pricing Concepts  Internal/External Factors of Price  Pricing Objectives  Elasticity  Cost-based Pricing
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Ch. 12 - 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.) 3. Costs your costs affect your profit, so set the  optimal price
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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 for good A   % CHANGE 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 elastic Down Down inelastic Up Up inelastic Up Down elastic 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 
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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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This note was uploaded on 01/15/2012 for the course MKT 300 taught by Professor Eaton during the Fall '08 term at ASU.

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Chapter 12 Notes - Ch.12PricingConcepts Internal/...

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