Chapter 13 Flashcards
Price
Money or other considerations In exchange for ownership or use of a product
Barter
Practice of exchanging products for other products
Value
Ration of perceived benefits price
=Perceived Benefits/Price
Value-Pricing
Practice of simultaneously increasing a product and service benefit while maintaining or decreasing price
Profit Equation
Total Revenue - Total Cost
Or
Unit Price * Quantity Sold - (Fixed Variable Price)
Pricing Objectives
Specify the role of price in an organizations marketing and strategic plans
Pricing Constraints
Factors that limit the range of prices a firm may set
Demand Curve
Graph relating quantity sold, and price, which shows the max number of units that will be sold at a given price
Demand Factors
Determine consumers willingness and ability to pay for products
Price Elasticity of Demand
% Change in quantity relative to a percent change in price
% Change in quantity / % change in price
Total Revenue
Total money received from sales of product
TR = P * Q
Total Fixed Cost
Total expense incurred by a firm producing and marketing products.
TC = FC + VC
Break-Even Analysis
Technique that analyzes the relationship between total revenue and total cost to determine profitability at various levels of output.
BEP = (Fixed Cost - Unit Variable Cost)
Final Price
=List Price - (Incentives and Allowances) + Extra Fees
Price Examples
Tuition
Step 1 of Setting Price
Identify Pricing Objective and Constraints
Objectives: Profit, Market Share, Survival
Constraints: Demand for class & brand, cost, newness, competition.
Step 2 of Setting Price
Estimate Demand and Revenue
Demand Estimate, Sales Revenue, Price Elasticity
Step 3 of Price Setting
Determine Cost, Volume, and Profit Relationships
Cost estimate, Marginal analysis in profit, Break even analysis in profit
Profit Objectives
Market Share ($ or %)
Unit Volume (#)
Survival (Radio Shack)
Social Responsibility
1-3 Pricing Constraints
-Demand For Products Class, group, and brand
-Newness of Product
-Newer Product Priced Higher
4 - 6 Pricing Constraints
-Cost of Producing & Marketing Product
-Profit for Channel Members
-Cost of Changing Prices & the Time Period Apply
7 - 9 Pricing Constraints
- Single Product Versus Product Line
- Competitors Prices and Consumers ability to purchase
- Legal and Ethical Considerations
3 Demand Factors
- Customer Taste
- Prices and Availability of Similar Products
- Consumer Income
What things are considered inelastic
Necessities:
Diapers and Formula
Gas
Example of Variable Cost
Shopping Cost
Examples of Fixed Cost
Insurance, Rent
