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10-1 Chapter 10 Pricing Considerations and Approaches Factors to Consider When Setting Prices 10-2 Price is the Amount of Money Charged for a Product or Service. Internal Factors Pricing Decisions External Factors Internal Factors Affecting Pricing Decisions Marketing Objectives Marketing-Mix Strategy Costs Organizational Considerations 10-3 External Factors Affecting Pricing Decisions Market and Demand Competitors’ Costs, Prices, and Offers Other External Factors Economic Conditions Reseller Needs Government Actions Social Concerns 10-4 Market and Demand Factors that Affect Pricing Decisions Pure Competition Monopolistic Competition Many Buyers and Sellers Who Have Little Effect on the Price. Many Buyers and Sellers Who Trade Over a Range of Prices. Pricing in Different Types of Markets Oligopolistic Competition Few Sellers Who Are Sensitive to Each Other’s Pricing/ Marketing Strategies Pure Monopoly Single Seller 10-5 Price Elasticity of Demand 10-6 Price A. Inelastic Demand Demand Hardly Changes With a Small Change in Price. P2 P1 Price Q2 Q1 Quantity Demanded per Period B. Elastic Demand Demand Changes Greatly With a Small Change in Price. P’2 P’1 Q2 Q1 Quantity Demanded per Period What is Cost-Plus Pricing and Why is it Popular? 10-7 Adding a Standard Markup to the Cost of the Product. Sellers Are More Certain About Costs Than Demand Perceived Fairness to Both Buyers and Sellers Minimizes Price Competition 10-8 Breakeven Analysis or Target Profit Pricing Cost in Dollars (millions) Tries to Determine the Price at Which a Firm Will Break Even or Make a Target Profit Total Revenue Target Profit ($2 million) 12 10 8 6 4 2 0 Total Cost Fixed Cost 200 400 600 800 Sales Volume in Units (thousands) 1,000 Cost-Based Vs. Value-Based Pricing Cost-Based Pricing 10-9 Value-Based Pricing Product Customer Cost Value Price Price Value Cost Customers Product