Pricing (price policy)
• How do consumers process and evaluate
prices?
• How should a company set prices initially
for products and services?
• How should a company adapt prices to
meet varying opportunities:
• When should company initiate a price
change?
Price is...
• Price is the one element of the marketing
mix that produces revenue – the other
elements produce costs.
• Prices are perhaps the easiest element of
the marketing program to adjust.
• Throughout most of history, prices were
set by negotiation between buyers and
sellers. Bargaining is still a sport in some
areas.
How companies price?
• Factors of pricing:
Internal factors
External factors
Perception of price
• Reference prices: comparing an observed price to an
internal reference price which customers remember or to
an external frame of reference such as a posted „regular
retail price.“
• Price-quality inferences: many consumers use price as
an indicator of quality
• Price endings: Prices that end with 0 and 5 are
common in market place. Also ending with „9“ is very
popular.
The three major considerations in price setting: costs set a flooor to the price.
Competitor´s prices and the price of substitutes provide an orienting point.
Consumers ´ assessment of unique features establishes the price ceiling.
Selecting the final price
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Impact of other marketing activities
Company pricing policies
Gain-and-risk sharing pricing
Impact of price on other parties
Adapting the price
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4.
Geographical pricing
Price discounts and allowances
Promotional pricing
Differentiated pricing