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To
To the
the seller...
seller... To
To the
the consumer...
consumer...
Price
Price is
is revenue
revenue Price
Price is
is the
the cost
cost
of
of something
something
Price
Price allocates
allocates resources
resources
in
in aa free-market
free-market economy
economy
Flood
Floodof
ofnew
newproducts
products
Increased
Increasedavailability
availabilityof
ofbargain-priced
bargain-pricedprivate
private
and
andgeneric
genericbrands
brands
Price
Pricecutting
cuttingas
asaastrategy
strategyto
tomaintain
maintainor
or
regain
regainmarket
marketshare
share
Internet
Internetused
usedfor
forcomparison
comparisonshopping
shopping
Profit-Oriented
Sales-Oriented
Status Quo
Target
Target
Profit
Profit Satisfactory
Satisfactory Return
Return on
on
Maximization
Maximization Profits
Profits Investment
Investment
Market
Market Sales
Sales
Share
Share Maximization
Maximization
Online
http://www.target.com
http://www.walmart.com
http://www.jcpenney.com
Maintain
Maintain Meet
Meet
existing
existing competitions
competitions
prices
prices prices
prices
Profit-Oriented
Market Sales
Maintain
Share Maximization
Existing Price
Online
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The Demand Curve
22
The Supply Curve
23
How Demand and Supply
Establish Price
Elasticity of Demand -
Consumers responsiveness or
sensitivity to changes in price.
Down Up Elastic
Up Up Inelastic
Up Down Elastic
Unitary
Up or Down Stays the Same
Elasticity
Copyright 2013 by Cengage Learning Inc. 28
All Rights Reserved
Elasticity of Demand
29
Factors that Affect Elasticity of
Demand
Availability
Availability of
of substitutes
substitutes
Price
Price relative
relative to
to
purchasing
purchasing power
power
Product
Product durability
durability
AAproducts
productsother
other uses
uses
Online
http://www.columbiahouse.com
Rate
Rate of
of inflation
inflation
32
LO3
The Power of
Yield Management Systems
Discounting
Discountingearly
earlypurchases
purchases
Limiting
Limitingearly
earlysales
salesat
atdiscounted
discounted prices
prices
Overbooking
Overbookingcapacity
capacity
LO4
37
The Cost Determinant of Price
Types
Types of
of Costs
Costs
Variable
Variable Fixed
Fixed Cost
Cost
Cost
Cost
Varies
Varies with
with changes
changes Does
Does not
not change
change
in
in level
level of
of output
output as
as level
level of
of output
output changes
changes
Markup
Markup pricing
pricing
Keystoning
Keystoning
Methods
Used to
Set Prices Profit
Profit Maximization
Maximization
Pricing
Pricing
Break-Even
Break-Even
Pricing
Pricing
Fixed cost
Contribution
= Price - Avg. Variable Cost
LO5 45
Other Determinants of Price
Competition
Competition
Distribution
Distribution Strategy
Strategy
Promotion
Promotion Strategy
Strategy
Perceived
Perceived Quality
Quality
$ $ $ $
Decrease
High Stable Decrease
Stable
High
Franchising
Product
Product selection
selection
Second
Second opinions
opinions from
from expert
expert sites
sites
Shopping
Shopping bots
bots
Internet
Internet auctions
auctions
Price Guarantee
Match any competitors price
Signals to target market it is positioned as a low-
price dealer
Online
http://www.vivre.com
http://www.ashford.com
Copyright 2013 by Cengage Learning Inc. 54
All Rights Reserved
Dimensions of Quality
1. Ease of use
2. Versatility
3. Durability
4. Serviceability
5. Performance
6. Prestige
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