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CHAPTER 11 The Price Strategy Factors Affecting Price • • • • • • Costs and Expenses Supply and Demand Consumer Perceptions Competition Government Regulations Technological Trends Pricing Objectives • • • • • Return-on-Investment Market Share Social and Ethical Considerations Meeting Competitor’s Prices Establishing an Image Price Strategy Options • Basic – cost-based – demand-based – competition-based • Pricing Policies – flexible-price – one-price Product Life Cycle • • • • Introduction Growth Maturity Decline Psychological Pricing • • • • prestige pricing odd/even pricing price lining promotional pricing Discount Pricing • • • • • cash quantity trade promotional seasonal Break-even Analysis • fixed expenses divided by unit sales price minus variable expenses • see p. 189 for an example Markup • amount added to the cost of the item to cover expenses and ensure a profit • see p. 190 for examples Markdown • amount of money taken from the original price • see p. 191 for examples Discount • reduction in price to the customer (as a percentage) • see p. 192 for examples Possible Price Changes • • • • Adjusting prices to maximize profit Reacting to market prices Revising terms of sale Revising the price strategy
