PowerPoint Slides With Teaching Notes
PowerPoint Slide Teaching Notes
14-1: Pricing Concepts for Establishing
Value
14-2: Pricing Concepts for Establishing
Value
These are the learning objectives for this chapter.
14-3: Proctor & Gamble Ask students: What’s the most you will pay for
laundry detergent?
Why would you pay that price?
It really comes down to the benefits and value
they place on their favorite laundry detergent.
14-4: The Five Cs 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 an
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
sells 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 the 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
customers’ expectations.
To help consumers 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’ microeconomics 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.
Ask students: As a consumer, how readily do
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: 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) Walmart 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).