Price

1
Price
2
FIGURE 13-2 The price of three different
purchases
Slide 13-8
3
Defining Customer Value
Total Customer Value
( Product, Service, Personnel, Image Values )
Total Customer Cost
( Monetary, Time, Energy, Psychic Cost )
-
Customer Delivered Value
( Profit to the Consumer )

(Source 1996 Prentice Hall)
4
Price Considerations

• Competition
• Costs and Profits
• Customer
• Demand
• Needs-Wants

5
FIGURE 13-3 Steps in setting price
Slide 13-12
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STEP 2 ESTIMATE DEMANDAND REVENUE

• Fundamentals of Estimating Revenue

• Price Elasticity of Demand

• Elastic Demand

• Inelastic Demand

• Unitary Demand

Slide 13-35
7
FIGURE 13-11 Calculating a break-even point for
a picture frame store
Slide 13-45
8
s
FIGURE 14-2 Four approaches for selecting an
approximate price level
Slide 14-7
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FIGURE 14-2 Four approaches for selecting an
approximate price level
Slide 14-7
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STEP 4 SELECT ANAPPROPRIATE PRICE LEVEL

• Competition-Oriented Approaches

• Customary Pricing

• Above-, At-, or Below-Market Pricing

• Loss-Leader Pricing

Slide 14-18
11
FIGURE 14-6 Three special adjustments to list or
quoted price
Slide 14-29
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FIGURE 14-7 The structure of trade discounts
Slide 14-32
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FIGURE 14-B Markups for a manufacturer,
wholesaler, and retailer on a home appliance sold
to the consumer for 100
Slide 14-33
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FIGURE 14-9 Five most common deceptive pricing
practices
Slide 14-41
15

• Questions?

16
Penetration Pricing

• Results in faster adoption and market penetration
• Creates early adopter goodwill,
• Creates cost reduction and cost control
  pressures,
• Discourages entry of competitors,
• Creates channel support through stock-turn.

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Price Skimming

• Product uniqueness and inelastic demand
• Based on sequential targeting and product
  positioning
• Initial price is high and is lowered as
  competition enters
• Converts the added value of differentiation to
  profit

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Cost-Based Pricing

• Advantages
• Price can be set higher than costs
• Fairness
• Costs are measurable and known
• Ease of administration
• Cost rules stabilize prices

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Cost-Based Pricing

• Disadvanages
• Costs aren't know at the time prices are set
• A product can be sold at less than average cost
  and still contribute to profits
• Cost-based rules are economically inefficient,
  costs are often managed
• The first consideration should be the consumer

20
Price-Quality Issues

• Quality Assurance Pricing - price reinforces
  brand image.
• Prestige Pricing - buyers want quality and demand
  is inelastic