Today I will: Learn the role value plays in pricing decisions
So I can: Explain the goal of pricing
I will know I’m successful when: I see the value of Pricing as
one of the key components of the Marketing Mix
Price – the value in money (or its equivalent) placed on a good or service
Value = Anticipated Satisfaction
Low anticipated
satisfaction
High anticipated
satisfaction
Lower Price
Higher Price
Return on Investment (ROI) – a calculation used to determine the
relative profitability of a product
Rate of Return (also referred to as “profit margin”)
= Profit ÷ Investment
Investment = $750
Sales = $1,000
Profit = $250
$250 (profit) ÷ $750 (investment) = ROI of 33%
Question: Does higher price equal higher revenue?
Question: Does higher price equal higher revenue?
Price per item x
Quantity Sold =
Sales Revenue
$50
200
$10,000
$45
250
$11,250
$40
280
$11,200
$35
325
$11,375
$30
400
$12,000
$25
500
$12,500
What gain comes from this kind of pricing strategy?
Market Share – a firm’s percentage of total sales volume
generated by all competitors in a given market.
Value? = long term Benefits via gaining more customers
Individual Assignment
Write out on your note paper. Worth 3 points at end of unit. Be
prepared to share when called on.
1) Name a company where pricing is related to its image and
promotion of that image. Explain how they do this.
2) Provide two examples of how businesses compete when not
competing on price.
3) It costs $6.50 to manufacture, package and market a pair of flipflops. They sell for $10.00. What is the rate of return on
investment?
4) Why may the price of a concert ticket vary depending on where
the concert is held within the United States?