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The amount of money charged for a product or service; the sum of the values that customers exchange for the benefits of having or using the product or service
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| customer Value-vbased pricing |
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| uses buyers perceptions of value as the key to pricing. value based pricing means that the marketer cannot ddesign a product and marketing program and then set the price. price is considered along with all other marketing mix variables before the amrketing program is set |
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| offering the right combination of quality and good service at a fair price. in mayn cases this has involved introducing less-expensive versions of established brand-name products. for example-value menu on mcdonalds or tacobell menu |
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| attaching value added features and services to differentiate a company's offers while charing higher prices |
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involves setting prices based ont eh costs for producing, distributing, and selling the product plus a fair rate of return for its effort and risk.
Low cost producer-walmart
high cost producer-BMW |
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fixed costs
Variable costs
Total costs |
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| also known as overhead costs and do not vary with production or sales levels |
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vary direcetly with teh level of production
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| markup pricing-adding a standard markup to the cost of the product. electronics retailer might pay a manufacturer 20 dollars for a flash drive and marke it up to sell at 30 dollars, a 50% mark up on cost |
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| also knwon as target return pricing, setting price to break even on teh costs of making and marketing a product, or setting price to make a target return |
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| competition based pricing |
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involves setting prices based on competitors strategies prices costs and amrket offerings. in assessing competitors pricing strategy, must ask the questions:
how does the company market offering compare with competitors offerings int erms of customer value. Next, how strong are current competitors and what are their current prcing strategies? |
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| Other Internal and external considerations affecting price decisions |
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| internal factors include: comapny's overall marketing strategy, objectives and marketing mix as well as other organziational consideraltions. External factors include the nature of the market and demand and other environmental factors |
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| Overal marketing strategy, obejectives and mix |
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Definition
| price is only one element of the copany's braoder marketing strategy. So, before setting price, teh comapny must decide on its overall marekting strategy for the product or service. If the company has selected its target market and positioning carefully, then its marketing mix strategy including price, will be fairly straightforward. |
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| pricing tht starts with an ideal selling price and then targets costs that will ensure that the price is met |
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| Organizational consideratios |
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| management must decide who within the organization shoudl set prices. Small companies, prices are often set by top management rather than by the marketing or sales departments. Large companies, pricing is typically handled by divisional or product line managers. Industrial markets, salespeople may be allowed to negotiate with custoemrs within certain price ranges. even so, top management sets the pricing objectives and policies and it often approves the price proposed by lower level management or salespeople |
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| as noted earlier, good pricing starts with an understanding of how customers perceptions of value affect the prices they are willing to pay |
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| economic factors such as a boom or recession, inflation and interest rates affect pricing decisions because they affect consumer spending, consumer perceptions of the product's price and value, and the company's costs of producing and selling a product |
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| company must consider several other factors in its external environement when setting prices. it must know what impact its prices willl have on other parties ini its environment. how will resellers reacto to various prices. also government and social concerns are important too. |
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| covers different items in its line. this pricing structure changes over time as products move through thteir life cycles. the company adjusts its rpices tor eflect changes in costs and demand and to account for varioations in buyers and situations |
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| new-product pricing strategies |
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| market skimming pricing and market penetration pricing |
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| price skimming-setting a high price for a enw product to skim maximum revenues layer by layer from the segmenets willing to pay the high price; the company makes fewer but more profitable sales |
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| marekt penetration pricing |
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| setting a low price for a new product to attract a large number of buyers and a large market share |
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| Product mix pricing strategies |
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| product line pricing/optional product pricing/captive product pricing/by product pricing/product bundle pricing |
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| setting the price steps between various produccts ina product line based on cost differences between the products, customer evaluations of different features and competitors prices |
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| the pricing of otpional or accessory products along with the main product |
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| setting ap rice for products that must be used along with a main product, such as blades for a razor and games for a videogame console |
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| setting a price for by products to make the main products price more compeitive |
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| combining several products and offering the bundle at a reduced price |
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| price adjustment strategies |
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| discount alloance pricing/segmented pricing/psychological pricing/promotional pricing/geographical pricing/dynamic pricing/international pricing |
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| a straight reduction in rpice on purchases made during a stated period of time or in larger quantities |
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| a reduction from teh list price for buyer actions such as trade ins or promotional and sales support |
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| price reductions given for turning in an old item when buying a new one |
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| paments or price reductions that reward dealers for participating in advertising and sales support programs |
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| selling a product or service at two or more prices, where the differences in prices is not based on differences in costs: customer-segment/product form pricing/location based pricing |
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| pricing, different custoemrs pay different prices for the same product or service |
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| different versions of the product are priced differently but not according to differences in their costs |
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| a company charges different prices for different locations, even though the cost of offering each location is the same |
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| pricing taht considers teh pyschologly of prices, not simply the conomics; the price says something about the product |
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| prices that buyers carry in their minds and refer to when they look at a given product |
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| temporarily pricing products below the list price, and sometimes even below cost to increase short run sales: discounts/special event pricing/limited time offers/flash sales/cash rebates/low interest inancing/longer warranties/free mantenanc |
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| company must decide how to rpice its products for customers located in different parts of the world:origin pricing/uniform delivered pricing/zone pricing/basing-point pricing/freight-absorption pricing |
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| customer to pay the shipping cost fromt he atlanta factory to the customers location: free on board pricing |
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| uniform delivered pricing |
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| customer pays price plus average freight cost no matter where you live |
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| pay a specified price from within a zone and the fartehr the zone is, the higher the price |
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| freight absorption pricing |
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| seller absorps all the freight pricing in order to obtain the consumer |
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| adjusting prices continually to meet the characteristics and needs of individual customers and situations |
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| companies that market their prodcuts internationally must decide what prices to charge in different countries |
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| after developing tehir pricing structures and strategies, companies often face situations in which they must initate price changes or respond to rpice changes by competitors |
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