#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