MARKETING AN INTRODUCTION
9 Armstrong/Kotler
Pricing
Understanding and Capturing Customer
Value
Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall
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 Value-added
pricing 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 Breakeven
Pricing Pricing
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Breakeven Pricing
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Types of Costs
Fixed Variable Total
Costs Costs 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, Organizational
The Economy
Objectives, and Considerations
Mix
The Market and
The Government Social Concerns
Demand
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Pricing in Different Types of Markets
Monopolistic
competition
Pure Oligopolistic
competition competition
Pricing
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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
Initiating
Price
Price Cuts
Increases
Buyer Competitor
Reactions to Reactions to
Price Changes 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
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Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall