#13 Pricing

#13 Identify and describe market factors that can affect prices and cite legal and ethical considerations for price planning, including price fixing and price discrimination, among others.

The Price is Right

Let's play a pricing game!

Objectives for today's Lesson

List the four market factors that affect price planning

Analyze demand elasticity and supply-and-demand theory

Explain how government regulations affect price planning

Let's start thinking about Pricing

1. What would happen to a local store if it charged the same amount for its goods as it pays for them?
2. What are some factors that might affect the price of a product?
3. How do you determine what a product is worth to you?

In this lesson we will learn how businesses make pricing decisions.
Follow along with the PowerPoint presentation.

Chapter 25.1  What is Price?

• Price forms the essential basis of commercial transactions which started from a bartering system.
• Value is a matter of anticipated satisfaction.
• A seller must gauge where a product will rank in the customer's estimation of value.

"Price" comes in many forms and is known by a variety of names:  rent, commission, dues, fee, interest, wage, tuition, salary, bonus

A well-planned pricing strategy should result in fair and appropriate prices.  Aproppriate pricing helps establish and maintain a firm's image, competitive edge, and profits.

Goals of Doing Business

1. Earning a profit - ROI  Formula: Rate of Return = Profit/Investment
2. Gaining market share- a firm's percentage of the total sales volume generated by all competitors in a given market. (market position)
1. A company that reports it's market share is $2,400,000.  What is the problem with this figure?
3. Meeting the competition- price competition vs. non-price competition
1. What are some ways that a product can compete other than price?

Review Key Concepts (p589)

1. Explain the relationship between product value and price in a consumer's mind.
2. Explain why a higher price does not always bring in higher sales revenue.
3. Identify other ways, besides price, that marketers have to accomplish the goal for improving market share. 

Chapter 25.2

We played a game of The Price is Right!
What were some of the items that you knew the prices?
How do you think these prices are determined?

Market Factors Affecting Pricing

How do businesses make pricing decisions?  Constant changes in the marketplace force businesses to review pricing decisions frequently.
Key market factors that must be considered when reviewing and establishing prices:

• Costs and expenses (break even point)
• Supply and demand
• Consumer perceptions
• Competition

Legal and Ethical Considerations for Pricing

Price Fixing
Price Discrimination
Unit Pricing
Resale Price Maintenance
Unfair Trade Practices
Price Advertising
Pricing Ethics - R&D, Price Gouging

Review Key Concepts

1. Identify four pricing options a business might consider in response to increased costs and expenses.
2. List five factors that affect demand elasticity.
3. Name the government agency that regulates price advertising.
4. Identify the federal laws involved in the following situations: (a) price fixing; (b) price discrimination;  and (c) resale price maintenance.
5. You work for a company that makes and sells watches.  Calculate the break-even point for a watch that costs $14 to make and market, and that will be sold for $40.  The total quantity that will be sold at that price is 100,000 watches. 

Credit to Glencoe Marketing Essentials 2012

#10 Business Ethics

Standard 10:  Write a report on ethical dilemmas that could be encountered when conducting business with international partners.  Cite how U.S. business practices differ from those of other countries.

Opening Activities

1. Research "ethics" on the internet.  Write a definition in your own words. Cite the resource where you gathered your information.
2. Whistle-Blowing Article #1
3. Whistle-Blowing Article #2 
4. Research the two articles above about Whistle-Blowing.  Be prepared to tell the details of a famous whistle-blower in history.  Who was it?  Who were they calling out?  What was the unethical issue at hand?  How was the whistle-blower treated?
5. Read the Marketing Case Study "Tide's Loads of Hope Campaign" on the bottom of page 151.  Calculate the math problem in the gold box.

You're Going to Like This!

Today we're talking about choices.  Click on the following link to play... Would You Rather.

What are Ethics?

• Doing what is right
• Well-being of everyone
• Follow the law (rules)

Ethics and Consumerism

• Consumerism involves the relationship of marketing to a company's customers.
• Protecting consumer's rights by putting legal, moral, and economic pressure on business, individual consumers, consumer groups, government, business leaders
• John F. Kennedy's Consumer Bill of Rights

Ethics in Marketing

Ethics in business create trust between a company and its stakeholders

• Self-regulation
• Better Business Bureau
• American Marketing Association Code of Ethics

 

What have we learned so far?

What is the basis for ethical behavior?
Why was the Consumer Bill of Rights created?
How can membership in the Better Business Bureau help businesses?  How can it help consumers?
Why does it fall on the shoulders of a business's management to demonstrate ethical behavior?

Ethical Issues Related to Marketing Functions

• Price gouging- pricing products unreasonably high when the need is great or when consumers do not have other choices. (prescription drugs, supplies needed during disasters)
• Marketing Information - must keep customer's personal information private
• Selling practices - bribes (dinner?), kickbacks/favors (gifts), high-pressure sales tactics (to meet quotas)

Managerial and Personnel Issues

Management sets the tone on ethics.  Employees follow management's expectations.

• Sarbanes-Oxley Act of 2002
• Proper Accounting and Reporting - Company execs can be held accountable for misreporting financial situation
• Whistle-Blowing Protection - reporting an illegal action of one's employer
• If you discovered that financial records were altered in order to cover up personal purchases made by the top execs, would you report it?
• If you did, you would be a whistle-blower.
• If you were fired for whistle-blowing, you would have recourse under federal laws governing whistle-blowing.

Guidelines for Ethical Behavior

To make the right choices, employees should follow these steps:

1. Get the facts.
2. Identify all parties concerned.
3. Think of all your alternatives.
1. Is it in compliance with the law?
2. Does it go against company policy?
3. How does it affect everyone included?
4. Is it right, fair, and honest?
5. Will it build good will for the company?
6. Am I comfortable with it?
7. How will it hold up to public scrutiny?

What have we learned so far?

What are three unethical selling practices?
Why does it fall on the shoulders of a business's management to demonstrate ethical behavior?
Do you think whistle-blowing laws are necessary?  Why or why not?

Ethical Dilemmas Essay:  Due Monday

Read the article linked above "Ethical Dilemmas"
Google:  ethical issues facing international businesses.

1. Prepare a two-page essay covering three different issues that may be encountered when conducting business with international partners. - 15 points (one-page 5 points, one & half page 10 points)
2. Research the topic, write essay in your own words. 15 points 
3. Use the 5 paragraph essay format:  1st paragraph - introduction to topic, 2-4th paragraphs - 3 supporting paragraphs (3 issues faced...), 5th paragraph - conclusion.  10 points
4. Must be typed, 12 pt font, Times New Roman, double-spaced.  10 points

Alternate Group Project

Some countries have practices that might not be ethical in American business standards like giving gifts.  Or, they might expect to share extended time socially before entering business talks.

• Prepare a presentation with a partner highlighting the importance of ethics in international business. 
• Share at least 3 different international business practices that would be different from American expectations.  They can be 3 practices in one country or 3 practices from different countries.  
• Be specific.  Name the country.
• We will complete the project and give presentations next class period.
• 15 points - 3 practices
• 10 points - original narrative (do not copy/paste; short, precise information per slide)
• 10 points - presentation

Supporting Articles

Legal and Ethical Issues In International Business Expansion

Top Ethical Issues Facing the General Business Community

8 Dark Secrets Nobody Told you About Food At the Supermarket