MARK 3321 1st Edition Lecture 12Outline of Last Lecture I. Nonprofit Organization MarketingII. Target Markers for NonprofitsIII. Marketing Channels IV. Specialization and Division of LaborV. Channel IntermediariesVI. Channel Functions performed by IntermediariesVII. Making Channel Strategy DecisionsVIII. Types of Channel RelationshipsIX. Channel Power, Control, and LeadershipX. Channel Conflict and PartneringXI. Classification of OwnershipXII. Non-store RetailingXIII. Retail Marketing StrategyOutline of Current Lecture I. PriceII. Importance of Price to Marketing ManagersIII. Pricing ObjectivesIV. Demand Determinant of PriceV. Factors that affect elasticity of demandVI. Yield Management SystemsVII. The Cost Determinant of PriceVIII. The Break-Even PointCurrent LectureCH 19 – Pricing Concepts- What is Price?o Price is that which is given up in an exchange to acquire a good or service- The importance of price to marketing managerso Revenue The price charged to customers multiplied by the number of units sold Price x quantityThese notes represent a detailed interpretation of the professor’s lecture. GradeBuddy is best used as a supplement to your own notes, not as a substitute.o Profit  Revenue minus expenses- Pricing objectiveso Profit-oriented Profit maximization Satisfactory profits Target return on investment- ROI = net profits after taxes/total assetso ROI = 550,000/4,500,000 = 12.2%o Sales-oriented Market share- Can be based on revenue or units- Based on the industry you’re competing it- To calculate it, you need the size of industry Sales maximizationo Status quo- The demand determinant of priceo Demand The quantity of a product that will be sold in the market at various prices for a specified periodo Supply The quantity of a product that will be offered to the market by a supplier at various prices for a specified periodo Price equilibrium The priced at which demand and supply are equalo Elasticity of demand Consumers’ responsive or sensitivity to changes in price- Factors that affect elasticity of demando Availability of substitutes When many substitutes are available, it is easy to switch products, making demand elastic.  The same is true in reverse, if no substitutes are available.o Price relative to purchasing power If a price is so low that it is an inconsequential part of an individual’s budget, demand will be inelastic and people are not sensitive to the price increase.o Product durability Repairing durable products rather than replacing them prolongs their useful life. If the cost of a new product increases, people might elect to repair the old product. Thus, people are sensitive to the price increase, and the demand is elastic.o A product’s other uses The greater the number of uses for a product, the more elastic demand tends to be. If a product has only one use, the quantity purchased probably will not vary as price varies.o Rate of inflation- Yield management systemso A technique for adjusting prices that use complex mathematical software to profitably fill unused capacity- The cost determinant of priceo Types of costs Variable costs- Varies with changes in level of output Fixed costs- Do not change as level of output changes- The Break-even