Movement vs Shift in Demand Curve
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Movement along demand curve: Price and quantity demanded changes, all
other factors remain unchanged
Shift in demand curve: Increased/decreased demand for the same price
Total Revenue and Total Profit
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Total Revenue
- The total money received from the sale of a product
= unit price x quantity sold
, Total Profit
= Total revenue - Total cost
Pricing Constraints
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- factors that limit the range of prices a firm may set
- Demand for product class, product group, and brand
- Newness of product
- Cost of producing and marketing product
- Cost of changing price and time period they apply
- Single product vs product line
- Type of competitive market
- Competitors' price and consumers' awareness of them (Consumer driven
pricing actions and Seller/retailer-driven pricing actions)
- Legal and Ethical Concerns
Price - The Forgotten "P"
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- Price goes by different names, rent, tuition, fee, premium, wage, salary,
dues, interest
- Price is the amount of money exchanged for products and services
- Not straightforward, it's like walking on a tightrope
= List Price - Incentives and Allowances + Extra Fees
Break-Even Chart
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, - A graphic presentation of the break-even analysis that shows when total
revenue and total cost intersect to identify profit or loss for a given quantity
sold
Demand Oriented Approaches Part 2
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- Odd-Even Pricing: Setting prices a few dollars or cents under an even
number. Left digit bias
- Target Pricing: (1) estimate price ultimate consumers are willing to pay (2)
work backward though markups to determine what to charge wholesalers
(3) adjust features to achieve target consumer price
- Bundle Pricing: Marketing two or more products in a single package price
- Yield Management Pricing: Charging different prices to maximize revenue
for a set amount of capacity at any given time (Airlines)
Cost-Oriented Approaches
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- Standard Markup Pricing: Adding a fixed percentage to the cost of all
items in a specific product class. High-volume products = smaller markups
(Kroger, Movie snacks)
- Cost-Plus Pricing: Summing the total unit cost of providing a product or
service and adding a specific amount to the cost to arrive at a price. (1)
Cost-plus percentage-of- cost: fixed percent is added to the total unit cost
(2) cost-plus fixed-fee: supplier is reimbursed for all costs, but is allowed
only a fixed fee as a profit
- Experience Curve Pricing: based on the learning effect, which holds that
the unit cost of many products and services declines by 10-30% each time a
firm's experience at producing and selling them doubles.
Give this one a try later!
Movement along demand curve: Price and quantity demanded changes, all
other factors remain unchanged
Shift in demand curve: Increased/decreased demand for the same price
Total Revenue and Total Profit
Give this one a try later!
Total Revenue
- The total money received from the sale of a product
= unit price x quantity sold
, Total Profit
= Total revenue - Total cost
Pricing Constraints
Give this one a try later!
- factors that limit the range of prices a firm may set
- Demand for product class, product group, and brand
- Newness of product
- Cost of producing and marketing product
- Cost of changing price and time period they apply
- Single product vs product line
- Type of competitive market
- Competitors' price and consumers' awareness of them (Consumer driven
pricing actions and Seller/retailer-driven pricing actions)
- Legal and Ethical Concerns
Price - The Forgotten "P"
Give this one a try later!
- Price goes by different names, rent, tuition, fee, premium, wage, salary,
dues, interest
- Price is the amount of money exchanged for products and services
- Not straightforward, it's like walking on a tightrope
= List Price - Incentives and Allowances + Extra Fees
Break-Even Chart
Give this one a try later!
, - A graphic presentation of the break-even analysis that shows when total
revenue and total cost intersect to identify profit or loss for a given quantity
sold
Demand Oriented Approaches Part 2
Give this one a try later!
- Odd-Even Pricing: Setting prices a few dollars or cents under an even
number. Left digit bias
- Target Pricing: (1) estimate price ultimate consumers are willing to pay (2)
work backward though markups to determine what to charge wholesalers
(3) adjust features to achieve target consumer price
- Bundle Pricing: Marketing two or more products in a single package price
- Yield Management Pricing: Charging different prices to maximize revenue
for a set amount of capacity at any given time (Airlines)
Cost-Oriented Approaches
Give this one a try later!
- Standard Markup Pricing: Adding a fixed percentage to the cost of all
items in a specific product class. High-volume products = smaller markups
(Kroger, Movie snacks)
- Cost-Plus Pricing: Summing the total unit cost of providing a product or
service and adding a specific amount to the cost to arrive at a price. (1)
Cost-plus percentage-of- cost: fixed percent is added to the total unit cost
(2) cost-plus fixed-fee: supplier is reimbursed for all costs, but is allowed
only a fixed fee as a profit
- Experience Curve Pricing: based on the learning effect, which holds that
the unit cost of many products and services declines by 10-30% each time a
firm's experience at producing and selling them doubles.
