chapter

pricing concepts for establishing value

thirteen

Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin

LEARNING OBJECTIVES

LO1 List the four pricing orientations.LO2 Explain the relationship between price and quantity

sold.LO3 Explain price elasticity.LO4 Describe how to calculate a product’s break-even

point.LO5 Indicate the four types of price competitive levels.LO6 Describe the difference between an everyday low price

strategy (EDLP) and a high/low strategy. LO7 Explain the difference between a price skimming and a

market penetration pricing strategy. LO8 List pricing practices that have the potential to deceive

customers.

Pricing Concepts for Establishing Value

13-2

The 5 C’s of Pricing

13-3

1st C: Company Objectives

13-4

2nd C: Customers

13-5

Demand Curves

13-6

Price Elasticity of Demand

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13-7

3rd C: Costs

• Variable Costs– Vary with production volume

• Fixed Costs– Unaffected by production

volume

• Total Cost– Sum of variable and fixed

costs

Michael Rosenfeld/Stone/Getty Images

13-8

Break Even Analysis and Decision Making

13-9

4th C: Competition

Subway Commercial 13-10

5th C: Channel Members

• Manufacturers, wholesalers and retailers can have different perspectives on pricing strategies

• Manufactures must protect against gray market transactions

13-11

Macro Influences on Pricing

• The Internet• Increased price

sensitivity• Growth of online

auctions

Ryan McVay/Getty Images

13-12

Economic Factors

13-13

vs..

Everyday low pricing (EDLP) High/low pricing

Everyday Low Pricing vs.. High/Low Pricing

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New Product Pricing Strategies

13-15

Legal Aspects and Ethics of Pricing

13-16