Marketing 3340

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Marketing 3340 Chip Besio
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WHEN MOTHER MAY NOT KNOW BESTTHE LAUNCH OF
STUBHUB.COM!

• Plan forthe Start-up

• How StubHubWorks Now

• StubHub Who Benefits and How?

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Quick-take quiz on price Answers that are part
numbers, part good judgment

1. (d) 2.7 trillion

1. (b) fixed cost

1. (b) gasoline

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NATURE AND IMPORTANCE OF PRICEWHAT IS A PRICE?

• Price

• Barter

• Price Equation

Final Price List Price (Incentives
Allowances) Extra Fees
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The price a buyer pays can take different names
depending on what is purchased
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NATURE AND IMPORTANCE OF PRICEPRICE AS AN
INDICATOR OF VALUE

• Value

• Value-Pricing

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NATURE AND IMPORTANCE OF PRICEPRICE IN THE
MARKETING MIX

• Profit Equation

Profit Total Revenue Total Costs
(Unit Price x Quantity Sold) (Fixed Cost
Variable Cost)

• Six Steps in Setting Price

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The six steps in setting price
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STEP 1 IDENTIFY PRICING OBJECTIVESAND
CONSTRAINTSIDENTIFYING PRICING OBJECTIVES

• Pricing Objectives

• Profit

• Managing for Long-Run Profits

• Managing for Current Profit

• Target Return (ROI)

• The World is Flattening

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MARKETING MATTERSHow Flattening the World
Affects Both Revenuesand Costs InfosysIKEA,
and You!
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STEP 1 IDENTIFY PRICING OBJECTIVESAND
CONSTRAINTSIDENTIFYING PRICING OBJECTIVES

• Pricing Objectives

• Sales ()

• Survival

• SocialResponsibility

• Market Share ( or )

• Unit Volume ()

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STEP 1 IDENTIFY PRICING OBJECTIVESAND
CONSTRAINTSIDENTIFYING PRICING CONSTRAINTS

• Pricing Constraints

• Demand for theProduct Class (Cars),Product
  (Sports Cars),and Brand (Bugatti Veyron)

• Newness of theProduct Stage in theProduct Life
  Cycle

eBay
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STEP 1 IDENTIFY PRICING OBJECTIVESAND
CONSTRAINTSIDENTIFYING PRICING CONSTRAINTS

• Single Product vs.a Product Line

• Cost of Producing andMarketing a Product

• Cost of ChangingPrices and Time PeriodThey Apply

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STEP 1 IDENTIFY PRICING OBJECTIVESAND
CONSTRAINTSIDENTIFYING PRICING CONSTRAINTS

• Type of Competitive Market

• Pure Competition

• Monopolistic Competition

• Oligopoly

• Pure Monopoly

• Competitors Prices

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Pricing, product, and advertising strategies
available to firms in four types of competitive
markets
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STEP 2 ESTIMATE DEMANDAND REVENUEFUNDAMENTALS
OF ESTIMATING DEMAND

• The Demand Curve

• Consumer Tastes

• Price and Availabilityof Similar Products

• Consumer Income

• Demand Factors

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STEP 2 ESTIMATE DEMANDAND REVENUEFUNDAMENTALS
OF ESTIMATING DEMAND

• Movement Along vs. aShift of Demand Curve

• Movement Alonga Demand Curve

• Shift in theDemand Curve

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Demand curves for Newsweek showing the effect on
annual sales (quantity demanded per year) by a
change in price caused by (A) a movement along
and(B) a shift of the demand curve
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Demand curve for Newsweek showing the effect on
annual sales by a change in price caused by a
movement along the demand curve
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Demand curve for Newsweek showing the effect on
annual sales by a change in price caused by a
shift of the demand curve
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STEP 2 ESTIMATE DEMANDAND REVENUEFUNDAMENTALS
OF ESTIMATING REVENUE

• Total Revenue (TR)

• Average Revenue (AR)

• Marginal Revenue (MR)

• Demand Curves and Revenue

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FIGURE 13-6 Fundamental revenue concepts
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How Newsweeks downward-sloping demand curve
affects total, average, and marginal revenues
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MARKETING MATTERSThe Airbus vs. Boeing
Face-offHow Many Can We Sell and at What
Pricein a 2.7 Trillion Market?

• Marketingand Pricing

• The Products

• Demand

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STEP 2 ESTIMATE DEMANDAND REVENUEFUNDAMENTALS
OF ESTIMATING REVENUE

• Price Elasticity of Demand

• Elastic Demand

• Inelastic Demand

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STEP 2 ESTIMATE DEMANDAND REVENUEFUNDAMENTALS
OF ESTIMATING REVENUE

• Price Elasticity of Demand

• Product Substitutes

• Necessities

• Large Cash Outlays

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Clothing and GasolineWhich product is more
sensitive to price changes?
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STEP 3 DETERMINE COST, VOLUME,AND PROFIT
RELATIONSHIPSTHE IMPORTANCE OF CONTROLLING COSTS

• Total Cost (TC)

• Fixed Cost (FC)

• Variable Cost (VC)

• Unit Variable Cost (UVC)

• Marginal Cost (MC)

• Marginal Analysis

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Fundamental cost concepts
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MARKETING MATTERSPricing Lessons from Failed
Dot-ComStart-upsUnderstand Revenues and Expenses

• Travel Dot-Com Successes (So Far)

• Brick-and-Mortar Dot-Com Failures

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STEP 3 DETERMINE COST, VOLUME,AND PROFIT
RELATIONSHIPSBREAK-EVEN ANALYSIS

• Break-Even Analysis

• Break-Even Point (BEP)

_______Fixed Cost_________
____FC____ BEPQuantity Unit Price Unit
Variable Cost P - UVC
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Profit is a maximum at the quantity at which
marginal revenue and marginal cost are equal
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STEP 3 DETERMINE COST, VOLUME,AND PROFIT
RELATIONSHIPSBREAK-EVEN ANALYSIS

• Break-Even Chart

• Applications ofBreak-Even Analysis

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Break-even analysis chart for a picture frame
store shows the break-even point at 400 pictures
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Calculating a break-even point for the picture
frame store shows its profit starts at 400 framed
pictures per year
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The cost trade-off Fixed versus variable costs