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9

Copyright © 2011 Pearson Education

Pricing

Veronica Mak 

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Is Price = Money?

Price is the amount of money chargedfor a product or service, or the sum of

the vaues that customers e!change forthe "enefits of having or using theproduct or service#

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$ Pricing %trategies

2. Competition- 

based pricing 

3. Cost-Based

 pricing 

1. Customer value- 

based pricing 

Pricing Considerations

&hree Pricing %trategies

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'aue()ased versus Cost()ased

Pricing

Competition-based pricing

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*vera Mar+eting %trategy,*"ectives, and Mi!

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Customer Value-Based

Pricing

( offering ust the right com"ination of

-uaity and good service at a fair price

( attaching vaue(added features and

services to differentiate a company.s

offers and charging higher prices#

 PnS: Everyday low price,

high-low pricing Chinese character

chocolates

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/ood('aue Pricing

*ffering the right

com"ination of

-uaity and good

service at a fair

price

Snap Fitness

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'aue(dded Pricing

 ttaching vaue(

added features

and services to

differentiate a

company.s offers

hie charging

higher pricesRather than cutting services tomaintain lower amission prices!premium theaters such as "#$%s$inema Suites are aingamenities an charging more&

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Problems of

Customer Value-Based Pricing

3hat are the

chaenges to a

mar+eter houses vaue(

"ased pricing?

Many vaues are

su"ective and

vary fromcustomer to

customer#

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Cost-Based Pricing

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&ypes of Cost()ased Pricing

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Breaeven Pricing

3hat is thePro"em?

it fais toconsidercustomer vaueand the

reationship"eteen priceand demand#

'aria"e cost

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Competition()ased Pricing

%etting prices

"ased on

competitors.

strategies, prices,

costs, and mar+et

offeringsFast-growing clothing

)outi*ue +ot #ama isn%tli,el to win a price waragainst giants li,e #ac%s or.ohl%s& /nstea! it relies onpersonal service! a mom- an,i-0rienl atmosphere! an

its ,nowlegea)le sta1 toturn harrie moms into lo al

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*ther Considerations ffectingPricing 4ecisions

Interna factors5

*vera mar+eting strategy, o"ectives, and

the mar+eting mi!

*rgani6ationa considerations

E!terna factors5

7ature of the mar+et and demand

*ther environmenta factors

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*vera Mar+eting %trategy,*"ectives, and Mi!

Company must decide on its overa

mar+eting strategy for the product and the

roe that price i pay in accompishing

o"ectives

Pricing decisions need to "e coordinated

ith pac+aging, promotion, and

distri"ution decisions

Positioning may "e "ased on price

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Pricing in 4ifferent &ypes of

Mar+ets

&rading in a uniform

commodity such asheat, copper, or

financia securities#

Many "uyers and

seers trading over

ranges of prices# 8P to

differentiate, e#g# car 

9e seers, e#g#petroeum suppiers

  firm.s fe!i"iity insetting price varies

depending on the

nature of the mar+et

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 nay6ing the Price(4emand

:eationship ( 4emand Curve

Price elasticity !

the change in

demand withthe change in

price:

 ; Elastic ; "nelastic

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&he Price(4emand Curve

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hen $on"gra raise prices on its an*uet 0roen inners! sales 0ellsharpl& he ,e component & & &is ou%ve got to )e at '! sas $: ;arRo,in! picture a)ove& verthing else pales in comparison to that&

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&he Economy5 Impact on Pricing

Economic factors have a strong impact on

pricing strategies

&he recent recession has ed to many

consumers "ecoming more vaue(

conscious

3hie some firms have cut price, others have

shifted to featuring more afforda"e items

%ome firms have hed price, "ut repositioned

"rands to enhance their vaue

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Mar+eting at 3or+

3hen the economy

dipped, rather than

cutting everyday

prices, 3hoe9oods set out to

convince shoppers

that it as, in fact,an afforda"e pace

to shop

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hole Foos assigne

wor,ers to serve as valuetour guies! li,e the onea)ove! to escort shoppersaroun stores pointing outvalue items

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7e(Product Pricing %trategies

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3hen to <se Mar+et(%+imming

Pricing

Product.s -uaity andimage supportsits higher price

Costs of o voumecannot "e so high thatthey cance out the"enefit of higher price

Competitors shoud not"e a"e to enter mar+eteasiy and undercut price

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3hen to <se Mar+et(Penetration

Pricing

Mar+et is highy pricesensitive so a o priceproduces more groth

Production and

distri"ution costsdecrease as saesvoume increases

o price can hep +eepout the competition, andthe penetration pricercan maintain its o(price position

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Product #i$ Pricing

%escafe

Softwares

&a'or (blade

)oodlandPar

)ellcome

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Price *d+ustments

:eduction from the ist price for "uyer actions such as trade(ins or promotiona and saes support

1> Customer segment pricing, e#g# museums 2> product(formpricing, e#g# evian $> ocation("ased pricing, e#g#universities8> time("ased, e#g# cinemas

( @igh price, "etter -uaity reference prices

( %easona sae

( 9*), Aone, uniform(deivery, etc#

*r B:ea(time pricing "ased on consumer.s "ehavior,e#g# ma6on, as+a irine

Mc4onad ham"urger in different countries#

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Price cutting

 dverse effects5

Create Bdea(prone customers

Erode a "rand.s vaue ead to price ars

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@o to react to price cutting?

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4eveoping an Integrated Mar+eting Mi!

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7on(test Part

eographical Pricing

"nternational Pricing ; &he price that a company shoud charge in a specific country depends

on many factors, incuding economic conditions, competitive situations,as and reguations, and deveopment of the hoesaing and retaiing

system#

 ; Costs pay an important roe in setting internationa prices#

 ; PB."C P/."C0 *%1 P&"C"%

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Identify the three maor pricing strategiesand discuss the importance ofunderstanding customer(vaue

perceptions, company costs, andcompetitor strategies hen setting prices#

Identify and define the other important

internal and e$ternal factors affecting afirm.s pricing decisions#

4escri"e the maor strategies for pricingimitative and new products#

 oa%s Summar

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E!pain ho companies find a set ofprices that ma$imi'e the profits from thetota product mi!#

4iscuss ho companies adust theirprices to ta+e into account different typesof customers and situations#

4iscuss the +ey issues reated to initiatingand responding to price changes

 oa%s Summar