Price, the Only Revenue Generator

Read this chapter for a thorough treatment of the critical concept of price, which the authors note is the only means a company has of generating revenue. This chapter discusses the process companies must go through to effectively price their offerings, including identifying pricing objectives, accounting for the factors that affect pricing decisions, and implementing a pricing strategy. Pay attention to concepts of pricing basics, value pricing, target pricing, price sensitivity and elasticity, dynamic pricing, rack pricing, and loss leaders.

Discussion Questions and Activities

ACTIVITIES

  1. In order to understand revenues and costs, get a two-liter bottle of soda, ten to twenty cups, and a bucket of ice. Fill each cup with ice and then fill it with soda. Assume each cup of soda sells for at least $1 and you paid $1 for the soda and $1 for the cups. How much profit can you make?
  2. Go to a fast-food restaurant for lunch. Figure out how much the price of a bundled meal is versus buying the items separately. Then decide if you think many consumers add a soda or fries because they feel like they're getting a deal.