MOS2320a/b | MARKETING

Chapter 11 Ceiling

the price
Floor
 Vision | Mission | Objectives
External Analysis

Marketing
Competitive Analysis
Consumer Analysis

Plan
(incl. research, behaviour, possible segmentations)

S.W.O.T.

Group
Company Analysis
(incl. targeting, positioning, value prop. & objectives)

Marketing Plan

Project
(incl. marketing mix: product, price, place, promotion)

Implementation
(incl. financial assessment, control)
 Price elastciity:
ineleastic demand:
Price:
tobacco, alcohol, weed,
gasoline
Elastic demand: change
occurs greatly
The 5 C's
Pricing strategies
New product pricing
Psychology of pricing
Pricing tactics
 Price: 5 C’s
Company Objectives:
Profit orientation
Sales orientation
Competitor orientation
Customer orientation
 Price: 5 C’s
Customers: Price Elasticity
Price elasticity of demand illustrates the response of demand to a
change in price
Inelastic demand occurs when demand hardly changes when there is a
small change in price
Elastic demand occurs when demand changes greatly for a small change
in price
Price elasticity of demand = % change in quantity demand
% change in price
 Price: 5 C’s
Customers: Price Elasticity
Razor and the razor blade for example

Cross-price elasticity
Substitution effect
Income effect
 Price: 5 C’s
Should you close vs open: you
Fixed costs remain the same
should stay open as fixed rate
throughout a specific period.
Variable costs can increase or
decrease based on the output of the Costs: does not change.

business. Examples of fixed costs

include rent, taxes, and insurance.
Examples of variable costs include
credit card fees, direct labor, and
commission
Variable costs
Fixed costs
Total Cost
 Price: 5 C’s
Costs: Break Even Analysis
Total Variable Cost = Variable Cost per unit X Quantity
Total Cost = Fixed Cost + Total Variable Cost
Total Revenue = Price X Quantity

Fixed Costs
Break-Even Point (units) =
Contribution per unit
Price: 5 C’s
Competition:
 Price: 5 C’s
Channel Members
Manufacturers, wholesalers and
retailers can have different
perspectives on pricing strategies
Manufactures must protect against
grey market transactions
 Price: 5 C’s
… some other factors
The Internet
Economic Factors
Globalization
Disposable Income
Pricing Strategies
 Pricing Strategies
Cost Based
Cost-base pricing methods start with cost
All costs calculated on a per unit basis
Assumes costs don’t vary for
different levels of production
 Pricing Strategies

Value Based
Setting prices that focus on the
overall value of the product
Consumer perceptions
Pricing Strategies
 New Product Pricing

Market Penetration
Pricing
Price Skimming
 Psychological Factors

Reference Pricing
Everyday low pricing (EDLP)
Odd prices
Price-quality relationship
 Psychological Factors

Price-quality relationship
Most inexperienced consumers use price as
an indicator of quality
Price becomes crucial when consumers
have little knowledge about certain products/
brands
Pricing Tactics: B2B
Seasonal Discounts
Cash Discounts
Allowances
Quantity discounts
Uniform delivered vs.
geographic pricing
 Pricing Tactics: B2B
Seasonal Discounts

Designed to spur buyers into purchasing merchandise early

Pricing Tactics: B2B

Cash Discounts

2/10 net 30
 Pricing Tactics: B2B
Allowances
Lowers the final cost in return
for specific behaviour
Advertising allowance
Listing allowance
 Pricing Tactics: B2B

Quantity discounts
Uniform delivered vs.
geographic pricing
Pricing Tactics: Consumer

Price Lining
Price Bundling
Leader Pricing
Pricing Tactics: Consumer

By-Product Pricing
Price Reductions: Consumer

Markdowns
Coupons & rebates
Quantity discounts
Seasonal discounts