© 2002 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin BUILDING THE PRICE FOUNDATION.
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Transcript of © 2002 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin BUILDING THE PRICE FOUNDATION.
© 2002 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
BUILDING THE PRICE
FOUNDATION
© 2002 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
• What is a Price? Barter
NATURE AND IMPORTANCE OF PRICE
© 2002 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
The price of four different purchasesThe price of four different purchases
© 2002 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
Lamborghini What will this car cost?
© 2002 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
• Price as an Indicator of Value Value-pricing
• Price in the Marketing Mix Profit Equation
NATURE AND IMPORTANCE OF PRICE
© 2002 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
Steps in setting priceSteps in setting price
© 2002 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
• Identifying Pricing Constraints• Demand for the Product Class, Product, and
Brand
• Newness of the Product: Stage in the Product Life Cycle
• Single Product versus a Product Line
• Cost of Producing and Marketing the Product
STEP 1: IDENTIFY PRICING CONSTRAINTS AND OBJECTIVES
© 2002 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
Collectable or
Trashable?
© 2002 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
Collectable or Trashable?
© 2002 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
• Identifying Pricing Constraints
• Cost of Changing Prices and Time Period They Apply• Types of Competitive Markets
Pure monopoly Oligopoly Monopolistic competition Pure competition
STEP 1: IDENTIFY PRICING CONSTRAINTS AND OBJECTIVES
© 2002 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
Pricing, product, and advertising strategies available to Pricing, product, and advertising strategies available to firms in four types of competitive marketsfirms in four types of competitive markets
© 2002 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
• Identifying Pricing Constraints• Competitors’ Prices
STEP 1: IDENTIFY PRICING CONSTRAINTS AND OBJECTIVES
© 2002 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
• Identifying Pricing Objectives• Profit
STEP 1: IDENTIFY PRICING CONSTRAINTS AND OBJECTIVES
© 2002 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
Where each Where each dollar of your dollar of your movie movie ticket goesticket goes
© 2002 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
Identifying Pricing Objectives
• Sales
• Market Share
• Unit Volume
• Survival
• Social Responsibility
STEP 1: IDENTIFY PRICING CONSTRAINTS AND OBJECTIVES
© 2002 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
• Fundamentals of Estimating Demand• The Demand Curve
STEP 2: ESTIMATE DEMAND AND SERVICE
© 2002 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
Illustrative demand curves for Illustrative demand curves for NewsweekNewsweek magazine magazine
© 2002 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
• The Demand Curve Demand factors
• Movement Along versus Shift of a Demand Curve
STEP 2: ESTIMATE DEMAND AND SERVICE
© 2002 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
• Fundamentals of Estimating Revenue Total revenue Average revenue Marginal revenue
STEP 2: ESTIMATE DEMAND AND SERVICE
© 2002 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
Fundamental revenue conceptsFundamental revenue concepts
© 2002 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
How a downward-sloping demand curve affects total, How a downward-sloping demand curve affects total, average, and marginal revenueaverage, and marginal revenue
© 2002 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
• Fundamentals of Estimating Revenue
• Price Elasticity of Demand Price Elasticity for Brands and Product Classes
STEP 2: ESTIMATE DEMAND AND SERVICE
© 2002 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
• The Importance of Controlling Costs Total cost Fixed cost Variable cost Marginal cost
STEP 3: DETERMINE COST, VOLUME, AND PROFIT RELATIONSHIPS
© 2002 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
Fundamental cost conceptsFundamental cost concepts
© 2002 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
• Marginal Analysis and Profit Maximization
STEP 3: DETERMINE COST, VOLUME, AND PROFIT RELATIONSHIPS
© 2002 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
Profit maximization pricingProfit maximization pricing
© 2002 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
• Break-Even Analysis Break-even point Break-even chart
• Calculating a Break-Even Point
STEP 3: DETERMINE COST, VOLUME, AND PROFIT RELATIONSHIPS
© 2002 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
Calculating a break-even pointCalculating a break-even point
© 2002 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
Break-even analysis chartBreak-even analysis chart