Chapter 18. Price Setting in the Business World. When You Finish This Chapter, You Should: 1. Understand how most wholesalers and retailers set their prices—using markups. 2. Understand why turnover is so important in pricing. | I Perreault-McCarthy Basic I 18. Price Setting in the Marketing A Business World Global-Managerial Approach 14 e I Text The McGraw-Hill Companies 2002 When You Finish This Chapter You Should 1. Understand how most wholesalers and retailers set their prices using markups. Chapter Eighteen 2. Understand why turnover is so important in pricing. 3. Understand the advantages and disadvantages of average-cost pricing. 4. Know how to use break-even analysis to evaluate possible prices. 5. Understand the advantages of marginal analysis and how to use it for price setting. 6. Understand the various factors that influence customer price sensitivity. 7. Know the many ways that price setters use demand estimates in their pricing. 8. Understand the important new shown in red . terms Price Setting in the Business World In the spring of 2001 Kmart s prices on products like toothpaste light bulbs laundry soap and beauty products were 10 to 15 percent higher than at Wal-Mart. Shoppers buy these items frequently and know what they pay. To provide equal value marketing managers for Kmart decided that they needed to cut prices on 4 000 products. And to highlight their price cutting they revived Kmart s hourly Blue Light Specials a surprise sale on an item that usually lasts about 15 minutes. It didn t double what they were in 1999 and 13 times what they were in 1990. Back then Wal-Mart earned about twice as much profit as Kmart even though they had about the same sales revenue. take long for Wal-Mart to announce that it would be putting even more emphasis on price rollbacks. By taking a longer-term look at how Wal-Mart has grown so fast in the past you ll get a pretty good idea how this wrestling match is going to turn out. To put the big picture in perspective Wal-Mart s current sales are about five times Kmart s. By the year 2005 Wal-Mart sales should exceed 330 billion place promotion price produc Perreault-McCarthy Basic I 18. Price Setting in the I Text Marketing A Business World
