Bài giảng Marketing - Chapter 13: Building the price foundation

McGraw-Hill/Irwin Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved.Identify the elements that make up a price.LO1Recognize the objectives a firm has in setting prices and the constraints that restrict the range of prices a firm can charge.Explain what a demand curve is and the role of revenues in pricing decisions.LO3LO2LEARNING OBJECTIVES (LO)AFTER READING CHAPTER 13, YOU SHOULD BE ABLE TO:Describe what price elasticity of demand means to a manager facing a pricing decision.Explain the role of costs in pricing decisions.LO4LO5LEARNING OBJECTIVES (LO)AFTER READING CHAPTER 13, YOU SHOULD BE ABLE TO:Describe how various combinations of price, fixed cost, and unit variable cost affect a firm’s break-even point.LO6THE RESULT OF AN “UNTHRILLED MOTHER”:THE LAUNCH OF STUBHUB.COM!Plan forthe Start-upHow StubHub’sPricing Works NowNATURE AND IMPORTANCE OF PRICEWHAT IS A PRICE?: THE PRICE EQUATIONLO1PriceBarterPrice EquationPrice and the Global MarketplaceFIGURE 13-1 The “price” a buyer pays can take different names depending on what is purchasedMARKETING MATTERSHow Flattening the World Affects Prices, Revenues, and Costs: InfoSys, IKEA, and You!LO1NATURE AND IMPORTANCE OF PRICEPRICE AS AN INDICATOR OF VALUELO1ValueValue-Pricing=$$NATURE AND IMPORTANCE OF PRICEPRICE AS AN INDICATOR OF VALUELO1Decoding Today’s Consumer PricesBOGO (Buy One, Get One Free)Q1: Which represents the biggestsavings in total dollars?a. A markdown from $85.27 to $70.66b. A markdown from $83.99 to $69.99c. A markdown from $80.00 to $70.00NATURE AND IMPORTANCE OF PRICEPRICE AS AN INDICATOR OF VALUELO1Decoding Today’s Consumer PricesBOGO (Buy One, Get One Free)Q2: Which represents the biggest percentage off a $2,000 item?a. 50% offb. 25% off, then another 25% off the reduced pricec. 20% off, then another 20% off the reduced price, then 20% off the twice-reduced priceNATURE AND IMPORTANCE OF PRICEPRICE AS AN INDICATOR OF VALUELO1Decoding Today’s Consumer PricesBOGO (Buy One, Get One Free)Q3: On a $40 pair of pants, whichoffer will yield the best discount?a. Buy one, get 50% off the secondb. $20 off all purchases of $50 or morec. A markdown of $10.00 on the pantsMARKETING MATTERSAmerican Eagle “Buy One, Get One Free” Hoodies: A Good Deal?LO1NATURE AND IMPORTANCE OF PRICEPRICE IN THE MARKETING MIXProfit EquationSix Steps in Setting PriceLO1FIGURE 13-2 The six steps in setting price. The first three steps are covered in Chapter 13 and the last three steps in Chapter 14.STEP 1: IDENTIFY PRICING OBJECTIVESAND CONSTRAINTSIDENTIFYING PRICING OBJECTIVESLO2Pricing ObjectivesProfitManaging for Current ProfitManaging for Long-Run ProfitsTarget Return (ROI)STEP 1: IDENTIFY PRICING OBJECTIVESAND CONSTRAINTSIDENTIFYING PRICING OBJECTIVESSales ($)SocialResponsibilityMarket Share ($ or #)Unit Volume (#)SurvivalPricing ObjectivesLO2STEP 1: IDENTIFY PRICING OBJECTIVESAND CONSTRAINTSIDENTIFYING PRICING CONSTRAINTSPricing ConstraintsDemand for theProduct Class (Cars),Product (Sports Cars),and Brand (Bugatti Veyron) Cost of Producing andMarketing the ProductLO2FIGURE 13-3 Where the $2,582 goes for a ticket to a Los Angeles Lakers basketball game sold by an online seller like StubHub STEP 1: IDENTIFY PRICING OBJECTIVESAND CONSTRAINTSIDENTIFYING PRICING CONSTRAINTSPricing ConstraintsNewness of theProduct: Stage in theProduct Life CycleeBayLO2Single Product vs.a Product Line STEP 1: IDENTIFY PRICING OBJECTIVESAND CONSTRAINTSIDENTIFYING PRICING CONSTRAINTSCost of Changing Pricesand Time Period They ApplyLO2Type of Competitive MarketPricing ConstraintsPure CompetitionMonopolistic CompetitionOligopolyPure MonopolyFIGURE 13-4 Pricing, product, and advertising strategies available to firms in four types of competitive marketsSTEP 1: IDENTIFY PRICING OBJECTIVESAND CONSTRAINTSIDENTIFYING PRICING CONSTRAINTSCompetitors’ PricesLO2Pricing ConstraintsSTEP 2: ESTIMATE DEMANDAND REVENUEFUNDAMENTALS OF ESTIMATING DEMANDLO3Demand CurveConsumer TastesPrice and Availabilityof Similar ProductsConsumer IncomeDemand FactorsSTEP 2: ESTIMATE DEMANDAND REVENUEFUNDAMENTALS OF ESTIMATING DEMANDMovement Along aDemand CurveLO3Movement Along vs. Shift of a Demand CurveShift in theDemand CurveFIGURE 13-5 Demand curves for Newsweek showing the effect on annual sales (quantity demanded per year) by a change in price caused by (A) a movement along and(B) a shift of the demand curveFIGURE 13-5A Demand curve for Newsweek showing the effect on annual sales by a change in price caused by a movement along the demand curveFIGURE 13-5B Demand curve for Newsweek showing the effect on annual sales by a change in price caused by a shift of the demand curveSTEP 2: ESTIMATE DEMANDAND REVENUEFUNDAMENTALS OF ESTIMATING REVENUETotal Revenue (TR)Average Revenue (AR)Marginal Revenue (MR)Demand Curves and RevenueLO3FIGURE 13-6 Fundamental revenue conceptsFIGURE 13-7 How Newsweek’s downward-sloping demand curve affects total, average, and marginal revenuesSTEP 2: ESTIMATE DEMANDAND REVENUEFUNDAMENTALS OF ESTIMATING REVENUEPrice Elasticity of DemandElastic DemandInelastic DemandUnitary DemandLO4STEP 2: ESTIMATE DEMANDAND REVENUEFUNDAMENTALS OF ESTIMATING REVENUEProducts/Services Considered NecessitiesItems That Require Large Cash OutlaysProduct/Service SubstitutesDecisions Involving Price ElasticityLO4FIGURE 13-8 Should Newsweek executives raise subscription and newsstand prices? This is the dilemma they face.STEP 3: DETERMINE COST, VOLUME,AND PROFIT RELATIONSHIPSTHE IMPORTANCE OF CONTROLLING COSTSTotal Cost (TC)Fixed Cost (FC)Variable Cost (VC)Unit Variable Cost (UVC)Marginal Cost (MC)Marginal AnalysisLO5FIGURE 13-9 Fundamental cost conceptsSTEP 3: DETERMINE COST, VOLUME,AND PROFIT RELATIONSHIPSBREAK-EVEN ANALYSISBreak-Even AnalysisBreak-Even Point (BEP)LO6FIGURE 13-10 Profit is a maximum at the quantity at which marginal revenue and marginal cost are equalFIGURE 13-11 Calculating a break-even point for the picture frame store shows its profit starts at 400 framed pictures per yearSTEP 3: DETERMINE COST, VOLUME,AND PROFIT RELATIONSHIPSBREAK-EVEN ANALYSISBreak-Even ChartApplications ofBreak-Even AnalysisLO6FIGURE 13-12 Break-even analysis chart for a picture frame store shows the break-even point at 400 picturesFIGURE 13-13 The cost trade-off: Fixed versus variable costsWASHBURN GUITARS:USING BREAK-EVEN POINTSTO MAKE PRICING DECISIONSVIDEO CASE 13VIDEO CASE 13WASHBURN GUITARS1. What factors are most likely to affect the demand for the linesof Washburn guitars (a) bought by a first-time guitar buyer and(b) bought by a sophisticated musician who wants a signature model?VIDEO CASE 13WASHBURN GUITARS2. For Washburn, what are examples of (a) shifting the demand curve to the right to geta higher price for a guitar line (movement of the demand curve) and (b) pricing decisions involving moving along a demand curve?VIDEO CASE 13WASHBURN GUITARS3. In Washburn’s factory, what isthe break-even point for the new line of guitars if the retail price is (a) $349, (b) $389, and (c) $309? Also, (d) if Washburn achieves the sales target of 2,000 units at the $349 retail price, what will its profit be?VIDEO CASE 13WASHBURN GUITARS4. Assume that the merger with Parker leads to the cost reductions projected in the case. What will be the (a) new break-even point at a $349 retail price for this line of guitars and (b) new profit if it sells 2,000 units?VIDEO CASE 13WASHBURN GUITARS5. If for competitive reasons, Washburn eventually has tomove all its production back to Asia, (a) which specific fixed and variable costs might be lowered and (b) what additional fixed and variable costs might it expect to incur?Price (P)A price (P) is the money or other considerations (including other products and services) exchanged for the ownership or use of aproduct or service.BarterBarter is the practice of exchanging products and services for other products and services rather than for money.ValueValue is the ratio of perceived benefits to price; orValue = (Perceived benefits divided by Price).Value-PricingValue-pricing is the practice of simultaneously increasing product and service benefits while maintaining or decreasing price.Profit EquationThe profit equation is:Profit = Total revenue − Total cost; orProfit = (Unit price × Quantity sold) − (Fixed cost + Variable cost).Pricing ObjectivesPricing objectives specify the role of price in an organization’s marketing and strategic plans.Pricing ConstraintsPricing constraints are factors that limit the range of prices afirm may set.Demand CurveA demand curve is a graph relating the quantity sold and price, which shows the maximum number of units that will be soldat a given price.Demand FactorsDemand factors are those that determine consumers’ willingness and ability to pay for products and services.Total Revenue (TR)Total revenue (TR) is the total money received from the saleof a product.Average Revenue (AR)Average revenue (AR) is the average amount of money received for selling one unit ofa product, or simply the price of that unit.Marginal Revenue (MR)Marginal revenue (MR) is the change in total revenue that results from producing and marketing one additional unit ofa product.Price Elasticity of DemandThe price elasticity of demandis the percentage change in quantity demanded relative to a percentage change in price.Total Cost (TC)Total cost (TC) is the total expense incurred by a firm in producing and marketing a product. Total cost is the sumof fixed cost and variable cost.Fixed Cost (FC)Fixed cost (FC) is the sum ofthe expenses of the firm that are stable and do not change withthe quantity of a product that is produced and sold.Variable Cost (VC)Variable cost (VC) is the sumof the expenses of the firm that vary directly with the quantity of a product that is produced and sold.Unit Variable Cost (UVC)Unit variable cost (UVC) is variable cost expressed on aper unit basis for a product.Marginal Cost (MC)Marginal cost (MC) is the change in total cost that results from producing and marketingone additional unit of a product.Marginal AnalysisMarginal analysis a continuing, concise trade-off of incremental costs against incremental revenues.Break-Even AnalysisBreak-even analysis is a technique that analyzes the relationship between totalrevenue and total cost to determine profitability atvarious levels of output.Break-Even Point (BEP)A break-even point (BEP) isthe quantity at which total revenue and total cost are equal.Break-Even ChartA break-even chart is a graphic presentation of the break-even analysis that shows when total revenue and total cost intersectto identify profit or loss for a given quantity sold.