Building the Price Foundation barter exchanging goods and services for other

Building the price foundation barter exchanging goods

This preview shows page 8 - 10 out of 13 pages.

Building the Price Foundation barter - exchanging goods and services for other goods and services rather than money price - the money or other considerations exchanged for ownership or use of a good or service o value - benefits / price o “Have you ever tried to sell a diamond?” must create a market for diamonds, but without a market for re-sellable diamonds benefits: buying into a story/emotional moment purchase task is high because people don’t want to assign value to certain things (life insurance, funeral, marriage/love, children) o factors that increase price : extra fees, extra charges, penalties o factors that decrease price : discounts, allowances, rebates o price = list price - (incentives + allowances) + extra fees 1. identify pricing objectives and constraints a business sets prices to meet objectives like: generate a certain amount of sales market share - maintain or increase firm's sales as percentage of its market unit volume - maintain or increase the number of products sold survival - mere survival in a competitive market social responsibility - setting product price low enough to make product affordable to people that need it (i.e. pharmaceuticals) profit: return on investment/assets 1. managing for long-run profits - give up immediate profit by developing high-end products to penetrate competitive markets profits generated via market share 2. maximizing current profit - setting a short term profit (quarter, year, or less) 3. target return - firm sets specific profit goal price constraints the number of potential buyers -- more demand, higher price can be charged newness of product -- stage in product lifecycle, newer = higher single product vs. product line -- must be consistent with other products in the market based on features cost of producing and marketing product -- firm must cover costs type of competitive markets -- higher competition = harder to change prices competitors prices -- more difficult to change prices if competitors’ prices are “standard” market competition pure competition - selling identical products; they can be perfectly replaced with another
Image of page 8
monopolistic competition - competing producers sell products that are differentiated from one another and are as good but not perfect substitutes (some points of distinction could be: branding, quality, or location) oligopoly - market or industry is dominated by a small number of sellers (i.e. cable, airlines, cell phone providers) pure monopoly - a specific person or enterprise is the only supplier of a particular product 2. estimate demand and revenue translate consumer demand into expected revenue intuition: lower price, increased demand (BUT you would have to offset less profit per product with volume which isn’t possible) demand in order for the demand curve to shift to the red line, favorable conditions would need to occur outside changes in price (i.e. changes in consumer tastes, loss of a competitor, increase of competitor prices, increase of consumer income) sales and revenue estimation price elasticity - how willing people are to pay an increased price determined by: substitutability -- more substitutes = more elastic
Image of page 9
Image of page 10

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture