Marketing 19

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Price

that which is given up in an exchange to acquire a good or service
Importance of Price
- 1) to seller, price is revenue
- 2) to consumer, price is cost of something
- 3) price allocates resources in a free market economy
Profit Oriented:
- -objectives include profit maximization, satisfactory profits, and target ROI
- Profit Maximization- setting prices so that total revenue is as large as possible relative to total costs
- Satisfactory Profits-reasonable profit levels
- ROI- most common profit objective. sometimes called firms return on total assets
Sales-Oriented
- based on Market share or Sales maximization
- Market Share- company's product sales as a % of total sales for that industry
Status Quo Pricing

pricing objective that maintains existing prices or meets the competition's prices
Demand Determinant of Price: Demand

the quantity of a product that will be sold in the market at various prices for a specified period
Demand Determinant of Price: Supply

the quantity of a product that will be offered to the market by a supplier at various prices for a specific period.
Price Equilibrium

price at which demand and supply are equal
Elasticity of Demand

Consumers' responsiveness or sensitivity to changes in price
Cost Determinant of Price: Markup Pricing

the cost of buying the product from the producer, plus amounts for profit and for expenses not otherwise accounted for
Cost Determinant of Price: Keystoning

the practice of marking up prices by 100%, or doubling the cost