978-0077729028 Chapter 14 Slides

Type

Quiz

Book Title

Marketing 5th Edition

ISBN 13

978-0077729028

April 8, 2019

Powerpoint Slides With Teaching Notes

Power Point Slide Teaching Notes

14-1: Pricing Concepts for Establishing

Value

14-2: Learning Objectives These are the learning objectives for this

chapter.

14-3: The 5 C’s of Pricing Ask students What’s the most you will pay for

laundry detergent?

Ask students why they will pay the prices

they mention? It really comes down to the

benefits and value they place on their favorite

laundry detergent.

14-4: The 5 C’s of Pricing The following slides discuss each C in detail;

alternatively, you can use this graph as a basis

for a shortened discussion.

14-5: 1st C: Company Objectives Each firm has a specific orientation in the

marketplace that dominates its pricing strategy.

Profit-oriented firms do not use value as a

consideration but rather focus on generating a

set level of profit from each sale.

14-6: Profit Orientation Ask students: What are the issues with a profit

orientation?

Answer: The key issue is that it does not take

into consideration the value customers have for

the product.

This may lead to prices being set below and

optimal level.

14-7: Sales Orientation Firms that want to attain market leadership set

prices at less profitable levels to gain market

share.

Ask Students: Why would firms adopt this

orientation?

Many first adopt this orientation to establish a

position in the market by getting the most price

sensitive consumers to change brands.

14-8: Competitor Orientation This strategy is particularly common among

smaller firms that lack knowledge or

experience in setting prices. Non-market leader

firms also use it to signal they are similar to

the market leader.

Ask students: What are the benefits of a

competitor strategy?

For example, can a new hotel chain indicate its

level of service through price?

The answer is yes. In many instances new

brands will set price equal to the competitors

they wish to be compared with knowing that

consumers use reference prices to indicate

quality

14-9: Customer Orientation A recent study indicates that a variety of

retailers sell one-carat diamonds, but

consumers pay vastly different prices at Costco

versus Tiffany’s.

The diamonds are a commodity; they must

meet the same standards and are rated the

same.

Ask students: Why would a consumer spend

thousands more to buy a stone at Tiffany’s?

This web link is to automotive.com website

where consumers can shop for the lowest gas

price around.

With prices at over $3 a gallon at some times,

many consumers are price sensitive enough to

search for cheaper gas.

14-10: Check Yourself 1 The five Cs of pricing are Company

Objectives, Customers, Costs, Competition,

and Channel Members.

2 The four types of company objectives are

Profit Orientation, Sales Orientation,

Competitor Orientation, and Customer

Orientation.

14-11: What are they trying to accomplish

with this ad?

Consumers have an expectation of a rental car

costing a lot of money. They don’t realize they

can rent the car for under $10 an hour.

Because Zipcar is a new product, they need to

set customer’s expectations. To help

consumer’s relate to the price, they compare it

to a purchase very familiar to the consumer.

14-12: 2nd C: Customers The following slides address different parts of

this graph; this slide serves as an introduction

to the topic of demand curves.

14-13: Demand Curves and Pricing This information should be a review from

students’ micro-economics coursework, so

they should be familiar with the concept, but

this discussion applies it in a slightly different

way.

Ask students to discuss their demand of online

music and videos.

Video: “E-Book Readers Face Sticker Shock”

Ask students as a consumer, how readily to

you buy e-books versus hard cover books?

Ask students to discuss the potential collusion

that could have occurred between the book

publishers.

14-14: Demand Curves Ask students to name a prestige product.

Why do they think people are willing to pay a

higher price?

For example, why will someone pay a higher

price for a BMW than a Kia?

They will mention product quality but also

branding issues including the esteem offered to

the owner from the BMW.

14-15: Price Elasticity of Demand For pricing, elasticity is a crucial concept.

14-16: Price Elasticity of Demand Ask students: In what circumstances will

raising the price NOT result in an increase in

revenue? In what circumstances will raising

the price result in an increase in revenue?

In elastic markets, depending on the level of

elasticity, a price increase can increase

revenues, but if the increase drives consumers

out of the market, demand falls, and a loss of

revenue may result.

In contrast, in inelastic markets, a price

increase almost always increases revenues,

because the relationship between price and

demand is weak. Pharmaceuticals provide a

good example; even if the price of a cancer

drug increases, consumers still demand it, so

the firm generates more revenue.

14-17: Factors Influencing Price Elasticity

of Demand

In this YouTube ad (always check link before

class)

Wal-Mart stresses good service in the holiday

season, but as always, ends their ad with

messaging related to their low price offerings

AND the importance of low price (live better).

14-18: Substitution Effect Discuss the case of Pete and how the income

and substitution effects alter his buying

behavior.

As a college student, he prefers a less

expensive substitute deodorant, because it

demands less of his total income.

Ask students: When Pete graduates and gets a

high-paying job, will he worry as much about

the cost of deodorant?

Do you expect him to switch back to Old

Spice? Why or why not?

14-19: Cross-Price Elasticity Just like Kendra, many people buy products

without considering the price of necessary

peripherals.

Kendra is caught in a cross-elasticity trap,

because her demand for one product generated

demand for the other.

Group activity: Brainstorm a list of other

products that exhibit cross-price elasticity.

14-20: Check Yourself 1 Fixed costs are those costs that remain

essentially at the same level, regardless of

any changes in the volume of production.

While variable costs are those costs,

primarily labor and materials, that vary

with production volume.

2 To determine the break-even point in units

mathematically, we must introduce one

more variable, the contribution per unit,

which is the price less the variable cost per

unit. Therefore, the break-even point

becomes Break-even point (units) = fixed

costs/contribution per unit.

14-21: 3rd C: Costs No discussion of price would be complete

without a discussion of cost.

The price must at least cover the cost of the

item.

However, as students may have learned in their

finance courses, understanding costs is rarely

easy.

14-22: Break Even Analysis and Decision

Making

Students might have discussed break-even in

previous classes – ask them what it is. In

many cases it is hard for students to define.

14-23: Break Even Analysis Although profit, which represents the

difference between the total cost and the total

revenue (total revenue or sales = selling price

of each unit sold number of units sold), can

indicate how much money the firm is making

or losing at a single period of time, it cannot

tell managers how many units a firm must

produce and sell before it stops losing money

and at least breaks even.

14-24: Check Yourself 1 Fixed costs are those costs that remain

essentially at the same level, regardless of

any changes in the volume of production.

While variable costs are those costs,

primarily labor and materials, that vary

with production volume.

2 To determine the break-even point in units

mathematically, we must introduce one

more variable, the contribution per unit,

which is the price less the variable cost per

unit. Therefore, the break-even point

becomes Break-even point (units) = fixed

costs/contribution per unit.

14-25: 4th C: Competition Group activity: List a product or service

market that demonstrates each type of

competition.

Monopoly: Microsoft software products.

Oligopolistic: Cable TV firms.

Pure: Most frequently purchased consumer

goods such as soft drinks.

Ask students if this price promotion has

motivated them to visit subway?

14-26: Subway This you tube ad is for a $5 foot long

commercial for Subway (always check link

before class). Students will be familiar with

this promotion.

Ask students if this price promotion has

motivated them to visit subway?

Note: Please make sure that the video file is

located in the same folder as the PowerPoint

slides.

14-27: Check Yourself 1 There are four levels of competition—

monopoly, oligopolistic competition,

monopolistic competition, and pure

competition.

14-28: 5th C: Channel Members Ask students: have you ever bought books

marked “Instructor Copy: Not for Resale,” or

“International Student Edition?”

Is the bookstore engaging in unethical

behavior? Whom does this gray market

benefit? Whom does it hurt?

Answer: The purchase of gray market

textbooks hurt the publisher and authors.

These books do not help recover the costs of

all the ancillary packages that are provided to

instructors.