Principlesofmarketing.com Chapter 8

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Principlesofmarketing.com Chapter 8 pricing

• Pricing as a strategic commitment and tool for
  customer satisfaction

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Factors that impact the pricing decision

• Supply (or cost)
• Demand (or revenue)
• Perceptions in the marketplace
• Competition and Competitors pricing strategies
• Government Regulation
• Companys desired pricing position

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Positive and Normative Price

• Positive price the price the organization
  decides to set
• Normative price the price that groups may
  believe is appropriate given certain
  circumstances

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Government regulation of prices and response of
businesses

• Three types of federal legislation that impact
  marketing
• Pro-competitive
• Consumer Protection
• Pro-trade (NAFTA, WTO, etc.)

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Government regulation of prices and response of
businessesPro-competitive Legislation

• Sherman Antitrust Act (1890)
• Clayton Antitrust Act (1914)
• Federal Trade Commission Act (1916)
• Robinson-Patman Act (1936)
• Fair Goods Pricing Act (1970)

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Government regulation of prices and response of
businessesConsumer Protection Legislation

• Pure Food and Drug Act (1906)
• Federal Trade Commission Act (1916)
• Wheeler-Lea Act (1938)
• Pure Food, Drug, and Cosmetices Act (1938)
• Magnuson-Moss Warranty Act (1975)

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Government regulation of prices and response of
businessesPro-Trade Legislation

• U.S. Constitution (1780)
• Domestic legislation already discussed
• NAFTA (North American Free Trade Agreement)
• GATT (general agreement on treaties and tariffs)
• WTO World Trade Organization and the issue of
  globalization

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Pricing Position

• An organization should carefully establish its
  desired pricing position
• For example, Rolex.com and Timex.com
• Also, bmw.com, etc.
• Remember to think in terms of positioning maps,
  especially when thinking about price. This works
  with stores, too.

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Can use either a supply based pricing approach or
a demand based pricing approach

• Supply (or cost-based) most common in retailing
  is the key stone or the key-stoning approach
• Demand-based (microeconomics and price elasticity
  of demand)
• Understand these approaches, philosophically and
  procedurally

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Determining selling price based on cost or
selling price

• Determining selling price based on cost
• SP MU C
• Selling price (SP) ?
• MU 40 of cost
• Cost 6000
• SP MU C
• SP .4 (6000) 6000
• SP 2400 6000
• SP 8400

• Determining selling price based on selling price
• SP MU C
• Cost 6000
• SP MU C
• SP .4(SP) 6000
• SP - .4SP 6000
• .6SP 6000
• SP 10,000

when markup equals fifty percent or .5 of
Selling price, this is called keystoning, use .5
and see what happens!?
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Assignments for next week

• Review the examples in Chapter Eight, and address
  the homework examples handed out on Price
  Elasticity of Demand