MARKETING AN INTRODUCTION Armstrong/Kotler MARKETING AN INTRODUCTION Armstrong/Kotler
9
Pricing
Understanding and Capturing Customer Value
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Chapter Outline
• What is a Price?
• Customer Perceptions of Value
• Company and Product Costs
• Other Internal and External Considerations Affecting Price Decisions
• New-Product Pricing
• Product Mix Pricing
• Price-Adjustment Strategies
• Price Changes
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What is Price
Price is the amount of money charged for a product or service, or the sum of the
values that customers exchange for the
benefits of having or using the product or
service.
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Major Pricing Strategies
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Customer Value-Based Pricing
Customer Value-Based Pricing
Buyer’s Perceptions of Value
Good-value pricing
Value-added
pricing
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Discussion Question What are the
challenges to a marketer who
uses value-based
pricing?
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Cost-Based Pricing
Cost-Based Pricing
Setting Price Based on Costs
Cost-Plus Pricing
Breakeven
Pricing
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Breakeven Pricing
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Types of Costs
Fixed Costs
Variable Costs
Total
Costs
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Discussion Question
Consider the lunch you purchased
today. To the
restaurant, what
were variable and
fixed costs for your
meal?
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Value-Based versus Cost-Based Pricing
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Internal and External Considerations Affecting Price Decision
Overall Marketing Strategy,
Objectives, and Mix
Organizational
Considerations The Economy
The Government Social Concerns The Market and
Demand
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Pricing in Different Types of Markets
Pricing
Pure competition
Monopolistic competition
Oligopolistic
competition
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Analyzing the Price-Demand Relationship - Demand Curve
Price elasticity – the change in demand with the change in price:
– Elastic
– Inelastic
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Discussion Question What products
have inelastic
demand? Elastic?
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New-Product Pricing
Market-skimming pricing
Market-penetration
pricing
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PRODUCT MIX PRICING
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PRICE ADJUSTMENTS
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Initiating Price Changes
Initiating Price Cuts
Initiating Price Increases Buyer
Reactions to Price Changes
Competitor
Reactions to
Price Changes
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Responding to Price Changes
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PUBLIC POLICY AND PRICING
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Pricing within Channel Levels Prohibited
Price fixing – talking with competitors to set prices
Predatory pricing – selling below cost with the intention of
punishing a competitor or putting
them out of business
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Pricing across Channel Levels Prohibited
Price discrimination – ensure same price to customers at
given level of trade
Price maintenance – requiring dealers to charge a specified
retail price
Deceptive pricing – seller states price that may mislead
customers
