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11 Cards in this Set

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  • Back
4 Different names for price
-Price is the money or other considerations (including other goods and services) exchanged for the ownership or use of a good or service.

-Barter is the practice of exchanging goods and services for other goods and services rather than for money.

-Price as an Indicator of Value:
-From a consumer’s standpoint, price is often used to indicate value when it is compared with the perceived benefits of a product or service.

-Price in the Marketing Mix
-Pricing is a critical decision made by a marketing executive because price has a direct effect on a firm’s profits.
Value pricing
The price of simultaneously increasing product and service benefits while maintaining or decreasing price.

Value = (Perceived Benefits)/Price
Pricing objectives
involve specifying the role of price in an organization’s marketing and strategic plans. To the extent possible, these pricing objectives are carried to lower levels in the organization, such as in setting objectives for marketing managers responsible for an individual brand.
Pricing constraints
are factors that limit the range of prices a firm may set. Consumer demand for the product clearly affects the price that can be charged. Other constraints on price vary from factors within the organization to competitive factors outside the organization.
Formula for total revenue
TR = P x Q

TR= Total revenue
P = unit price of the product
Q = quantity of the product sold
Equation for the Price of Elasticity
P(e)= (% change in Qd) /(% change in P)
3 Determinents of Price Elasticity
a.)The more substitutes a product or service has, the more likely it is to be price elastic.

b.)Products and services considered to be necessities are price inelastic, so open-heart surgery is price inelastic.

c.) Items that require a large cash outlay compared with a person’s disposable income are price elastic.
Break-even analysis
a technique that analyzes the relationship between total revenue and total cost to determine profitability at various levels of output.
Break-even Point
is the quantity at which total revenue and total cost are equal. Profit then comes from all units sold beyond the BEP.
Formula for Break-Even Point
BEP quantity = (Fixed cost) / ( Unit price – Unit variable cost)
Newsweek example
Newsweek conducted a pricing experiment at newsstands in 11 cities throughout the United States. At that time, Houston newsstand buyers paid $2.25, which in Forth Worth, New York, Los Angelos, and Atlanta; they paid the regular $2.00 price. In San Diego, the price was $1.50, while in Minneapolis- St. Paul, New Orleans, and Detroit it was only $1.00. By comparison, the regular newsstand price for Time and U.S. News & World Report, Newsweek’s competitors, was $1.95. Why did Newsweek conduct the experiment? According to a Newsweek executive, “We want to figure out what the demand curve for our magazine at the newsstand is.”