Pricing
The final element
Price
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Represents the value of a good or
service for both the seller and the buyer
It describes all forms of purchase, both
monetary and non-monetary
Price-planning
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Systematic decision-making by an
organization regarding all aspects of
buying
Importance
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Part of the exchange
Deregulation
Forms are more cost-conscious
Global economy= greater interest in
currency valuations and exchange rates
In slow economies it is hard to raise
prices
Relationship to other marketing
elements
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Prices vary over product life cycle
Affects customer service
Competitive with other firms, yet
profitable
Sales force may need flexibility
As costs change, prices or other
features may need to change
Approaches
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Price-based
Non-price based
Factors affecting price
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Demand
Costs
Government regulations (FTC)
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Price fixing
Price discrimination
Unfair sales acts
Unit pricing
Price advertising
Channel members
Competition
Developing and applying a pricing
strategy
Pricing objectives
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Sales-based
Profit-based
Broad price policy
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Sets the overall direction and tone for a
firm’s pricing efforts and makes sure
pricing decisions are coordinated with
the firm’s choices as to a target market,
an image, and other marketing mix
factors
Methods of setting prices
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Cost-based pricing
Demand based pricing
Competition based pricing
Cost-based pricing
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Cost-plus pricing
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Cost of the item + desired profit= price
Demand-based pricing
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A firm sets prices after studying
consumer desires and prices acceptable
to the target market
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Demand-minus pricing
Chain markup pricing
Price discrimination
Competition-based pricing
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Using competitors’ pricing rather than
demand or cost considerations as
primary pricing guideposts
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Price above
Price below
Meet competition
Price leadership
Considerations in implementing a
price strategy
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Customary vs. variable pricing
One price vs. flexible pricing
Odd pricing
Price-quality association
Leader pricing
Multiple unit pricing
Price lining
Price bundling
Geographic pricing
Purchase terms
Price adjustments
Customary vs. variable pricing
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Customary pricing a firm sets prices and
seeks to maintain them for an extended
period of time
Variable pricing- lets a firm intentionally
lower or raise prices in response to cost
fluctuations or differences in consumer
demand
One price policy vs. flexible
pricing
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One-price policy - lets a firm charge the
same price to all customers seeking to
purchase a good or service under
similar conditions
Flexible pricing – a firm sets prices
based on the consumer’s ability to
negotiate or the buying power of a
large customer
Odd pricing
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Set prices below even dollar amounts
Price-quality association
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Consumer may believe high prices
represent high quality and low prices
represent low quality
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Prestige pricing
Leader pricing
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Price select items low to attract
customers
Multiple-unit pricing
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A firm offers discount to customers to
encourage them to buy in quantity, as
to encourage overall sales volume
Price lining
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Involves selling products within a range
of prices, with each representing a
distinct level of quality or features
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Benefits
Constraints
Price bundling
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Sell a basic product, options, and
customer service for one total price
Geographic pricing
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FOB mill or factory
FOB destination
Uniform delivered
Zone pricing
Base-point pricing
Purchase terms
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Discounts
Payment timing
Price adjustments
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List prices
Escalator clauses
Surcharges
Additional markups
Markdowns
Rebates