pricing concepts and establishing value

• 5 c's of pricing 
• the overall sacrifice a consume is willing to make to acquire a specific product or service 
• succesful pricing strategies are buit around the 5 components 
• comprpany pricing obojectives 
• profit oriented - maximizing profits or reaching a target level  
• sales oriented - the aim to improve market share - set prices low temporarily, generate new sales; and take sales away from competitors 
• competitor oriented - prices set according to the competition, competitive parity, status quo 
• customer oriented - focus on customer expectations by matching prices to customer expectations 
• customers 
• economic theory: price-demand 
• changes in price affect demand 
• assessing customers' sensitivity to change in prices 
• demand increases as price decreases 
• when you have a lot of suppliers they are able to meet the demand then price will go down 
• the price-demand relationship is different for prestige products/services 
• demand increase as price decreases 
• demand decreases as price decreases 
• customer sensitivity to price changes = price elasticity of demand 
• measures the extent of the effect of price on the consumers demand ( purchase behavior) 
• income effect - change in income effects the quantity of a product demanded by consumers 
• substitution effect - the price of substitution effect the quantity of a product demand by consumers 
• cross-price elasticity : the effect of a change in the price of a product A on the demand Product B 
• Cost 
• Variable cost - cary with production and volume ( materials and labor costs) 
• fixed costs - uneffected by production volume - factory costs (e.g. rent, utilities, executive salaries)
• total cost - sum of variable and fixed costs = variable costs + fixed costs  
• break even point- just enough revenues to cover total costs 
• Channel Members - Manufacturers, wholesalers and retailers can have different perspective on pricing strategies 
• i.e. concerns for slaes versus image 
• manufacturers must protect against gray market transactions 
• where a product is bought and sold outside of the manufacturer's authorized (intended trading channels) 
• manufacturers,wholesalers and retailers can have different perspectives on pricing strategies 
• competition 
• monopoly- one firm control the market 
• oligopoly - a handful of firms control the market 
• mopolistic competition - many firms selling differentiated products at different prices 
• pure competition - many firms selling commodities for the same prices