Chapter 14
Pricing Concepts for Establishing Value
Tools For Instructors
Brief Chapter Outline
Learning Objectives
Chapter Overview (“Summing Up”)
Extended Chapter Outline with Teaching Tips
PowerPoint Slides with Teaching Notes
Answers to End of Chapter Learning Aids
Chapter Case Study
Additional Teaching Tips
Brief Chapter Outline
The Five Cs of Pricing
Macro Influences on Pricing
Summing Up
End of Chapter Learning Aids
Chapter Case Study: Planet Fitness: Pricing for Success
Learning Objectives
LO1 List the four pricing orientations.
LO2 Explain the relationship between price and quantity sold.
LO3 Explain price elasticity.
LO4 Describe how to calculate a product’s break-even point.
LO5 Indicate the four types of price competitive levels.
Chapter Overview (“Summing Up”)
LO1 List the four pricing orientations.
A profit-oriented pricing strategy focuses on maximizing, or at least reaching a target, profit for
the company.
A sales orientation instead sets prices with the goal of increasing sales levels. With a
competitor-oriented pricing strategy, a firm sets its prices according to what its competitors do.
Finally, a customer-oriented strategy determines consumers’ perceptions of value and prices
accordingly.
LO2 Explain the relationship between price and quantity sold.
Generally, when prices go up, quantity sold goes down. Sometimes, however—particularly with
prestige products and services—demand actually increases with price.
LO3 Explain price elasticity.
Changes in price generally affect demand; price elasticity measures the extent of this effect. It is
based on the percentage change in quantity divided by the percentage change in price.
Depending on the resulting value, a market offering can be identified as elastic, such that the
market is very price sensitive, or inelastic, in which case the market cares little about the price.
LO4 Describe how to calculate a product’s break-even point.
Because the break-even point occurs when the units sold generate just enough profit to cover the
total costs of producing those units, it requires knowledge of the fixed cost, total cost, and total
revenue curves. When these curves intersect, the marketer has found the break-even point.
LO5 Indicate the four types of price competitive levels.
In a monopoly setting, either one firm controls the market and sets the price. In an oligopolistic
competitive market, a few firms dominate and tend to set prices according to a
competitor-oriented strategy. Monopolistic competition occurs when there are many firms
competing for customers in a given market but their products are differentiated. Finally, pure
competition means that consumers likely regard the products offered by different companies as
basic substitutes, so the firms must work hard to achieve the lowest price point, limited by the
laws of supply and demand.
Extended Chapter Outline With Teaching Tips
The Five Cs Of Pricing (PPT slide 14-4)
Company Objectives (PPT slide 14-5)
Profit Orientation (PPT slide 14-6)
Sales Orientation (PPT slide 14-7)
Competitor Orientation (PPT slide 14-8)
Customer Orientation (PPT slide 14-9)
Check Yourself: Several questions are offered for students to check their understanding of core
concepts. (PPT slide 14-10)
1. What are the five Cs of pricing?
2. Identify the four types of company objectives.
Customers (PPT slide 14-12)
Demand Curves and Pricing (PPT slide 14-13, 14)
Price Elasticity of Demand (PPT slide 14-15, 16)
Factors Influencing Price Elasticity of Demand (PPT slide 14-17)
Income Effect
Substitution Effect (PPT slide 14-18)
Cross-Price Elasticity (PPT slide 14-19)
Check Yourself: Several questions are offered for students to check their understanding of core
concepts. (PPT slide 14-20)
1. What is the difference between elastic versus inelastic demand?
Answer: Elastic demand is when relatively small changes in price will generate fairly
large changes in the quantity demanded, so if a firm is trying to increase its sales, it can
2. What are the factors influencing price elasticity?
Costs (PPT slide 14-21)
Variable Costs
Fixed Costs
Total Cost
Break-Even Analysis and Decision Making (PPT slide 14-22, 23)
Mark-Up and Target Return Pricing
Check Yourself: Several questions are offered for students to check their understanding of core
concepts. (PPT slide 14-24)
1. What is the difference between fixed costs and variable costs?
Answer: Fixed costs are those costs that remain essentially at the same level, regardless
2. How does one calculate the break-even point in units?
Answer: To determine the break-even point in units mathematically, we must introduce
Competition (PPT slide 14-25)
Check Yourself: Several questions are offered for students to check their understanding of core
concepts. (PPT slide 14-27)
1. What are the four different types of competitive environments?
Channel Members (PPT slide 14-28)