Pricing Concepts
The amount of money (or its equivalent) placed on a good or service
What is price?
Charging different customers different prices in similar situations
Price Discrimination
This type of demand occurs when a change in price leads to little or no change in demand, often seen in necessities like gas or milk
Inelastic Demand
Formula for ROI
(Profit/Cost) x 100
4 P's of Marketing
Product, Price, Place, Promotion
Comparing prices by a standard unit is known as
Unit Pricing
Two competing airlines agree to set the same price on a route to avoid a price war.
Price Fixing
A new sneaker drops in price from $70 to $40. Sales double. Elastic or Inelastic?
Elastic
You bought a box of candy for $10 and sold it for $25. What is your ROI?
150%
The pricing objective involves calculating a rate to determine how profitable a product is based on investment
What is ROI?
A non-price competitive strategy
Quality
Convenience of business location
Uniqueness of product
Hours of operation
Level of service
Charging a student discount at the local pizzeria
Price Discrimination
The cost of eggs increases by 10%, but demand stays the same. Elastic or Inelastic?
Inelastic
You earn a $3 profit selling each bracelet. They cost $60 to make. How many do you need to sell to break even?
20 Bracelets
Define the term “break-even point” in your own words
Breakeven point is the point at which sales revenue equals the costs & expenses of making and distributing a product After this point (of units sold) businesses begin to make a profit
How does high value impact the price customers are willing to pay?
Customers are willing to pay high prices when they perceive the product to have high value.
Legal Implication of Price Fixing
A store raises the price of Trident gum from $1 to $5. Is the gum elastic or inelastic?
Elastic
You sold Skittles for a $2 profit (cost $1) and Doritos for a $2.50 profit (cost $1.50) . Which had the better ROI?
Skittles: 200%
An action a business might take if production costs increase besides raising the price
- Drop Features
- Upgrade Materials
- Reduce the size of an item
Main pricing objective of a seller
Set a price high enough for the firm to make a profit, but not so high that it exceeds customers value
A company advertising a low price product that is not actually in stock is an example of ___________. What are the legal implications (legal or illegal)?
Bait and Switch
The price of train tickets increases $1
Inelastic
You're at the store choosing between 2 bottles of shampoo. Which one is the better deal based on unit Pricing?
Dove: $5.99 for 12 ounces
Pantene: $7.49 for 18 ounces.
Pantene
Dove: .50
Pantene: .42
A factor that can determine if a product is elastic or inelastic
Brand Loyalty
Price Relative to Income
Availability of Substitutes
Luxury vs. Necessity
Urgency of Purchase