market factors affecting price @ ppt doms
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Market factors affecting price @ ppt domsTRANSCRIPT
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Market Factors Affecting Price
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Objectives Define Price and Pricing List the four market factors that affect price Identify and discuss each market factor Define elastic demand and inelastic demand List the 5 factors that contribute to demand
elasticity Identify and discuss each factor
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Price & Pricing Price: the money a customer must pay
for a product or service. Part of the Marketing Mix
Pricing: establishing and communicating the value of products and services to potential customers.
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Four Major Market Factors That Affect Price
1. Costs and Expenses
2. Supply and Demand
3. Consumer Perceptions
4. Competition
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1. Costs and Expenses Sales + Costs + Expenses = Profit Increasing costs and expenses lead
companies to: Increase price of product or service Reduce size of product or service Drop service that is not valued Add to their product or service
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1. Costs and Expenses Lower costs and expenses lead
companies to: Decrease prices of products and services
Improved technology and less expensive materials help companies produce better-quality products at lower prices. Example: the price of computers
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2. Supply and Demand With most products:
Demand increases with lower prices Demand decreases with higher prices
This does not apply to some products Demand Elasticity
The degree to which demand for a product is affected by its price
Products have either elastic or inelastic demand
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Elastic Demand
When a change in price creates a change in demand. Example: Price of Steak
Law of Diminishing Marginal Utility Consumers will only buy so much of a product even
if the price is low. Example: Price of Laundry Detergent
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Inelastic Demand
When a change in price has very little effect on demand for a product
Example: Milk Bread
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Demand Elasticity
The demand elasticity depends on five factors: Brand Loyalty Availability of Substitutes Price Relative to Income Luxury vs. Necessity Urgency of Purchase.
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Brand Loyalty When a customer
will not buy a substitute product over a brand name of their choice.
In this case brand is inelastic.
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Availability of Substitutes When there are a
variety of substitutes that will do the same job, the demand becomes elastic.
Example: Laundry Detergent
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Price Relative to Income
If a price increases dramatically and it is beyond a customer’s budget, they are less likely to buy it.
In this situation the demand will be elastic. Example:
A diamond ring
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Luxury vs. Necessity When a consumer feels that a product is a
necessity, the demand becomes inelastic. Example:
medicine
When a consumer feels that a product is a luxury, the demand becomes elastic.
Example: automobile
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Urgency of Purchase
If a purchase must be made immediately then the demand will be inelastic.
Example: Running out of gas
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3. Consumer Perceptions Price planning
involves what the consumers perceive
Some consumers associate quality with price High price equals high
quality High price equals
status, prestige, and exclusiveness
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3. Consumer Perceptions
Businesses limit a supply on the market to make the consumer think that it is worth more.
Example: Limited Edition
Personalized service can also add to a customer’s perception.
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4. Competition 2 Forms:
Non-Price Competition Price Competition
Non-price competition minimizes price as a reason for purchase. The more unusual a product, the greater the freedom to set prices above those of competitors.
Price competition allows a company to gain target market appeal by lowering prices.
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4. Competition
Companies are constantly watching each other. If one lowers their price, their competitors will lower their price too.
The benefit is lower prices for consumers. Price Wars:
When a company lowers their price to the point that they lose profits. Can cause financial trouble.
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Summary Defined Price and Pricing Listed the four market factors that affect
price Identified and discussed each market factor Defined elastic demand and inelastic
demand Listed the 5 factors that contribute to
demand elasticity Identified and discussed each factor