Credit Value-15

Learning Outcomes
 Explain the role of marketing and how it interrelates
with other functional units of an organisation.

 Compare ways in which organisations use elements

of the marketing mix (7Ps) to achieve overall business
objectives.

 Develop and evaluate a basic marketing plan.

Part-9
Price
 The amount of money charged for a product or a
service.

 Major factor affecting buyer choice.

 Only element in the marketing mix that produces

revenue.

 One of the most flexible marketing mix elements.

Major Considerations in Setting Price

 Strategy-Positioning -Luxury  high price

 Objective-to attract new customer, to prevent
competition etc.
 Demand and Price are inversely related.
Three Major Pricing Strategies
 Customer value-based Pricing: Setting price based on
buyers’ perceptions of value rather than on the
seller’s cost.

 Cost-based Pricing: Setting prices based on the costs

for producing, distributing, and selling the product
plus a fair rate of return for effort and risk.

 Competition-based Pricing: Setting prices based on

competitors’ strategies, prices, costs, and market
offerings.
 Customer oriented vs. Product driven
New-Product Pricing Strategies
 Market-Skimming Pricing
 The product’s quality and image must support its higher
price, and enough buyers must want the product at that
price.
 The costs of producing a smaller volume cannot be so
high that they cancel the advantage of charging more.
 Competitors should not be able to enter the market easily
and undercut the high price.
New-Product Pricing Strategies
 Market-Penetration Pricing
 The market must be highly price sensitive.
 Production and distribution costs must decrease as sales
volume increases.
 The low price must help keep out the competition, and
the penetration price must be maintained.
Product Mix Pricing Strategies
 Product line pricing
Setting the price steps between various products in a
product line based on-
 cost differences between the products
 customer evaluations of different features

 competitors’ prices.

 Optional product pricing

The pricing of optional or accessory products along with a
main product.
Product Mix Pricing Strategies
 Captive product pricing

 Setting a price for products that must be used along

with a main product.

 Product bundle pricing

 Combining several products and offering as bundle at

a reduced price.