All chapters belong together for a summary of the entire marketing subject taught by professor Nathalie Dens in the 1st year of the HI (B), tew and sew bachelor's degrees
Price and customer value
Price elasticity of demand
Percentage c h ange ∈quantity demanded
E= =η
percentage c h ange ∈ price
Unit price elasticity of demand
η = -2.26: 10% increase in price produces 26.2% decrease in quantity demanded (and
reversed)
Zero price elasticity of demand (η = 0)
demand is perfectly inelastic = demand does not change in any way when price changes
Infinite price elasticity of demand (η = ∞)
consumers will buy as much of a good as possibly at particular price but
at a higher price quantity demanded falls to 0
at a lower price the quantity demanded rises without limits
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, Marketing Nathalie Dens
Concept of pricing and cost
Price:
amount of money expected, required, or given in payment for something
Cost:
represents total money, time and resources sacrificed to produce or acquire an offering
Profit:
total revenue – total costs
- Pricing
o Income, flexible, easy to imitate
o Right price
=> determined by customers
- Proposition costs
o Fixed cost
Manufacturing plant and equipment, office buildings, cars and other
vehicles, salaries, professional service fees (e.x. legal, architectural)
o Variable costs
Equipment servicing costs, energy costs, mileage allowances, overtime and
bonus payments, professional services in a business with a strong regulatory
regime (e.x. pharmaceuticals)
- Relationship pricing – costs
o Increases in price
disproportionately positive effect on profit decreases in price
o Study identified that
1% increase in price = 8.7% improvement in profit
1% increase in variable costs = 5.9% improvement in profit
1% increase in volume sales = 2.8% improvement in profit
1% increase in fixed costs = 1.8% improvement in profits
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