{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

ch. 19 and 20 Pricing student version

ch. 19 and 20 Pricing student version - Ch 19 20 Pricing...

Info icon This preview shows pages 1–14. Sign up to view the full content.

View Full Document Right Arrow Icon
© 2010 Robert H. Smith School of Business University of Maryland Ch. 19 & 20 Pricing Strategy Professor Whitney Fall 2010
Image of page 1

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
© 2010 Robert H. Smith School of Business University of Maryland What is Price? Sacrifice Effect of Price What is sacrificed to get a good or service Money, Time Information Effect of Price Infer quality information based on price Higher quality = higher price Convey status Value Based upon Perceived Satisfaction Reasonable Price = Perceived Reasonable Value If price is too high, sales may be lost because not reasonable. Exchange based on expectation of satisfaction Ch. 19 How does this impact Apple’s pricing?
Image of page 2
© 2010 Robert H. Smith School of Business University of Maryland The Importance of Pricing Decisions Price X Sales Unit = Revenue Revenue – Costs = Profit Profit drives growth, salary increases, and corporate investment Prices too low may mean revenue isn’t as high as it could be, if the lower prices don’t increase sales proportionately.
Image of page 3

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
© 2010 Robert H. Smith School of Business University of Maryland Profit-Oriented Pricing Objectives Profit-Oriented Pricing Objectives Profit Maximization Profit Maximization Satisfactory Profits Satisfactory Profits Target Return on Investment Target Return on Investment
Image of page 4
© 2010 Robert H. Smith School of Business University of Maryland Return on Investment ROI = Net Profit after taxes Total assets Assume assets are $5 million, net profits are $400,000 and Target ROI was 10% ROI = $400,000 / $5,000,000 = 8% Pricing didn’t meet their goal. Net profit after taxes divided by total assets.
Image of page 5

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
© 2010 Robert H. Smith School of Business University of Maryland Sales-Oriented Pricing Objectives Market Share Market Share Sales Maximization Sales Maximization Sales-Oriented Pricing Objectives
Image of page 6
© 2010 Robert H. Smith School of Business University of Maryland Status Quo Pricing Objectives Maintain existing prices Maintain existing prices Meet competition’s prices Meet competition’s prices Status Quo Pricing Objectives
Image of page 7

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
© 2010 Robert H. Smith School of Business University of Maryland The Demand Curve
Image of page 8
© 2010 Robert H. Smith School of Business University of Maryland The Supply Curve
Image of page 9

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
© 2010 Robert H. Smith School of Business University of Maryland 10 Price Equilibrium
Image of page 10
© 2010 Robert H. Smith School of Business University of Maryland Elasticity of Demand Elasticity ( E ) = Percentage change in quantity demanded of good A Percentage change in price of good A If E is greater than 1, demand is elastic. If E is less than 1, demand is inelastic. If E is equal to 1, demand is unitary. LO 3 Price of A was $5.00 and changed to $6 Demand for A at $5 was 5,000,000 units Demand for A at $6 was 4,500,000 units What is the Elasticity?
Image of page 11

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
© 2010 Robert H. Smith School of Business University of Maryland Elasticity of Demand Q Q 1 Q Q 2 Quantity Quantity P P 1 Price Price P P 2 Q Q 1 Q Q 2 Quantity Quantity P P 1 Price Price P P 2 Elastic Inelastic Typically an inverse relationship. Higher price results in lower demand.
Image of page 12
© 2010 Robert H. Smith School of Business University of Maryland Factors that Affect
Image of page 13

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Image of page 14
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern