Chapter 14 - Pricing Concepts for Establishing Value Marketing 5th
2 How does this benefit–sacrifice ratio give Planet Fitness a competitive advantage in
3 Given its price strategy, why is it essential for Planet Fitness to continually attract
new members? Do its high-end pricing competitors face the same need? Why or why
Additional Teaching Tips
This chapter introduces students to the economic influence of setting prices.
Students often find these concepts difficult to grasp. Also introduced are the 5 Cs of
pricing, company objectives and strategy implications, and break-even point
The 5 Cs of pricing are critical for students to understand. Students often don’t
realize that other factors other than cost factors influence the pricing strategy.
Reviewing the five Cs of pricing and having students come up with examples will
help to enhance understanding of these concepts.
It is important for students to also understand that there may be other objectives other
than maximizing profit margin. Amazon.com in its first years purposely used a
competitor –oriented approach and sacrificed profit loss. The company was ridiculed by
other dot-coms until Amazon.com revealed their strategy: To have households identify
with the brand name. By pricing products and shipping low, it would increase usage of
the site. Thus, the strategy was to sacrifice profits to have Amazon.com become the
market leader and the household brand name recognition for online purchases.
The break-even point graph is often difficult for students to understand unless they have
had an economics course. Instructors will need to weigh the importance of teaching the
graph, the BEP formula, or both. Sometime will need to be spent by the instructor
explaining the graph. It is wise to give students a BEP problem such as the one listed in
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