1. Pricing Strategy and Management

3. Factors Affecting Pricing Internal Factors Costs Product, Strategy Pricing Decisions External Factors Competitors Customers

8. Pricing Considerations PRICE SENSITIVITY Price Quantity Demanded per Period A. Inelastic Demand - Demand hardly changes with a small change in price P 2 P 1 Q 1 Q 2 Price Quantity Demanded per Period P  2 P  1 Q  1 Q  2 B. Elastic Demand - Demand changes greatly with a small change in price

9. Product-Based Pricing Approaches Product Line Pricing Setting price steps between product line items i.e. $299, $399 Optional-Product Pricing Pricing optional or accessory products sold with the main product *** i.e. car options Captive-Product Pricing Pricing products that must be used with the main Product***i.e. Razor Blades, Film, Software By-Product Pricing Pricing low-value by-products to get rid of them ***i.e. Lumber Mills, Zoos Product-Bundle Pricing Pricing bundles Of products sold together ***i.e. season tickets, computer makers Source: Prentice Hall

15. Cost-Based Pricing COST-PLUS Minimizes price competition Perceived fairness for both buyers and sellers Sellers are more certain about costs than demand

29. Customer Considerations VALUE PRICING Cost-Based Pricing Value-Based Pricing Source: Prentice Hall Product Cost Price Value Customers Customer Value Price Cost Product