This document discusses key pricing strategies and metrics, including:
1) Price premium, reservation price, percent good value, price elasticity of demand, optimal price, and residual elasticity.
2) It provides definitions and formulas for calculating each metric, as well as considerations and the purpose of each in measuring pricing strategies.
3) Optimal price is calculated differently for linear versus constant elasticity demand curves, and aims to maximize contribution while accounting for how quantity changes with price.
This document discusses key pricing strategies and metrics, including:
1) Price premium, reservation price, percent good value, price elasticity of demand, optimal price, and residual elasticity.
2) It provides definitions and formulas for calculating each metric, as well as considerations and the purpose of each in measuring pricing strategies.
3) Optimal price is calculated differently for linear versus constant elasticity demand curves, and aims to maximize contribution while accounting for how quantity changes with price.
This document discusses key pricing strategies and metrics, including:
1) Price premium, reservation price, percent good value, price elasticity of demand, optimal price, and residual elasticity.
2) It provides definitions and formulas for calculating each metric, as well as considerations and the purpose of each in measuring pricing strategies.
3) Optimal price is calculated differently for linear versus constant elasticity demand curves, and aims to maximize contribution while accounting for how quantity changes with price.
trong chương này: Giá tối ưu, nhu cầu tuyến tính và Giá cao cấp không đổi Độ co giãn của giá theo "sở hữu", Giá bảo lưu "chéo" và "còn lại" phần trăm giá trị tốt Độ co giãn của cầu theo giá Metric Construction Considerations Purpose
7.1 Price The percentage by Benchmarks include Measures how a
Premium which the price of average price brand’s price com- a brand exceeds a paid, average pares to that of its benchmark price. price charged, competition. average price displayed, and price of a relevant competitor. Prices can be compared at any level in the channel and can be calculated on a gross basis or net of discounts and rebates. 7.2 Reservation The maximum Reservation prices are One way to con- Price amount an indi- difficult to observe. ceptualize a vidual is willing to demand curve is pay for a product. as the aggregation of reservation prices of potential customers. 7.2 Percent Good The proportion of Easier to observe than A second way to Value customers who individual reservation conceptualize a consider a product prices. demand curve is to be a good as the relationship value—that is, to between percent have a selling price good value and below their reser- price. vation price. Metric Construction Considerations Purpose
7.3 Price The responsiveness For linear demand, Measures the
Elasticity of of demand to a linear projections responsiveness of Demand small change in based on elasticity are quantity to price, expressed accurate, but elasticity changes in price. If as a ratio of changes with price. priced optimally, percentages. For constant elasticity the margin is the demand, linear pro- negative inverse of jections are approxi- elasticity. mate, but elasticity is the same for all prices. 7.4 Optimal Price For linear demand, Optimal price formu- Quickly deter- optimal price is las are appropriate mines the price the average of only if the variable that maximizes variable cost and cost per unit is con- contribution. the maximum stant, and there are no reservation price. larger strategic con- For constant elas- siderations. ticity, optimal price is a known function of vari- able cost and elas- ticity. In general, optimal price is the price that maximizes contri- bution after accounting for how quantity changes with price. 7.5 Residual Residual elasticity Rests on an assump- Measures the Elasticity is “own” elasticity tion that competitor responsiveness of plus the product of reaction to a firm’s quantity to competitor reac- price changes is pre- changes in price, tion elasticity and dictable. after accounting cross elasticity. for competitor reactions.