Marketing Essentials

Chapter 25: Price Planning

Chapter Summaries

Section 25.1

• Price is the value (in money or its equivalent) placed on a good or a service. There are many forms of price: fees, fares, tuition, rent, wages, commissions, etc.
• Pricing is a key factor in the success or failure of a product or service, and therefore of a business. It establishes an image, a competitive edge, and determines profits. Revenue = price x quantity sold.
• The goals of pricing are: earning a profit, gaining market share, and meeting the competition.
• Market share is a company’s percentage of the total sales volume generated by all companies in a given market. Market position is the standing a company has in its market in relation to its competitors.

Section 25.2

• Four market factors affect pricing: costs and expenses, supply and demand, consumer perceptions, and competition.
• In general, demand goes down when price goes up. Demand elasticity is the degree to which price affects demand. If a change in price creates a change in demand, demand is said to be elastic. If a change in price has little effect on demand, demand is inelastic.
• Government regulations control price fixing, price discrimination, resale price maintenance, minimum price, unit pricing, and price advertising.