Chapter 14: Pricing concepts for establishing value. In this chapter you will learn: List the four pricing orientations, explain the relationship between price and quantity sold, explain price elasticity, describe how to calculate a product’s break-even point, indicate the four types of price competitive levels,. | pricing concepts for establishing value fourteen Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 1 LEARNING OBJECTIVES LO 14-1 List the four pricing orientations. LO 14-2 Explain the relationship between price and quantity sold. LO 14-3 Explain price elasticity. LO 14-4 Describe how to calculate a product’s break-even point. LO 14-5 Indicate the four types of price competitive levels. LO 14-6 Describe the difference between an everyday low price strategy (EDLP) and a high/low strategy. LO 14-7 Explain the difference between a price skimming and a market penetration pricing strategy. LO 14-8 List pricing practices that have the potential to deceive customers. The 5 C’s of Pricing 3 1st C: Company Objectives Company Objective Examples of Pricing Strategy Implications Profit-oriented Institute a companywide policy that all products must provide for at least an 18 percent profit margin | pricing concepts for establishing value fourteen Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 1 LEARNING OBJECTIVES LO 14-1 List the four pricing orientations. LO 14-2 Explain the relationship between price and quantity sold. LO 14-3 Explain price elasticity. LO 14-4 Describe how to calculate a product’s break-even point. LO 14-5 Indicate the four types of price competitive levels. LO 14-6 Describe the difference between an everyday low price strategy (EDLP) and a high/low strategy. LO 14-7 Explain the difference between a price skimming and a market penetration pricing strategy. LO 14-8 List pricing practices that have the potential to deceive customers. The 5 C’s of Pricing 3 1st C: Company Objectives Company Objective Examples of Pricing Strategy Implications Profit-oriented Institute a companywide policy that all products must provide for at least an 18 percent profit margin to reach a particular profit goal for the firm. Sales-oriented Set prices very low to generate new sales and take sales away from competitors, even if profits suffer. Competitor-oriented To discourage more competitors from entering the market, set prices very low. Customer-oriented Target a market segment of consumers who highly value a particular product benefit and set prices relatively high (referred to as premium pricing). Profit-oriented Institute a companywide policy that all products must provide for at least an 18 percent profit margin to reach a particular profit goal for the firm. 4 Profit Orientation 5 Sales Orientation 6 Competitor Orientation Competitive parity Status quo pricing Value is not part of this pricing strategy Roz Woodward/Getty Images 7 = Focus on customer expectations by matching prices to customer expectations Website Customer Orientation C Borland/PhotoLink/Getty Images Don Farrall/Getty Images 8 2nd C: Customers 9 Demand Curves 10 Price .
