What is Price?

Price is the value of

money that consumers
must pay to a seller for
the goods or services
they buy.
Starbucks price around the
world
 Understanding Pricing
The Internet and Pricing effects on Sellers and Buyers
Buyers can:
 Get instant price comparisons from thousands of vendors
 Check price at the point of purchase
 Name their price and have it met
 Get products free
Sellers can:
 Monitor customer behavior and tailor offers to individuals
 Give certain customers access to special prices

Both buyers and sellers can:

 Negotiate prices in online auctions and exchanges
A Changing Pricing
Environment
- Bartering - Renting
How
Companies
Price?
 Consumer Psychology and Pricing
 REFERENCE PRICES
Possible Consumer Reference Prices
“Fair Price” (what consumers feel the product should cost)
Typical Price
Last Price Paid
Upper-Bound Price (reservation price or the maximum most consumers would pay)
Lower-Bound Price (lower threshold price or the minimum most consumers would pay)
Historical Competitor Prices
Expected Future Price
Usual Discounted Price

 PRICE-QUALITY INFERENCES
Many consumers use price as an indicator of quality.

 PRICE ENDINGS
Many sellers believe prices should end in an odd number.
Starbucks vs Coffee Bean
Setting the Price
Setting the Price
Step 1 : Selecting the pricing objective
Setting the Price
Step 2 : Determining demand
Setting the Price
Step 3 : Estimating costs
 Accumulated Production
Experience curve pricing has focused on manufacturing costs, but
all costs can be improved on, including marketing costs.
 Target costing
Costs change with production scale and experience. Market
research is used to establish a new product’s desired functions
and the price at which the product will sell, given its appeal and
competitors’ prices.
Setting the Price
Step 4: Analyzing Competitors’ Costs, Prices,
and Offers
Setting the Price
Step 5 : Selecting a Pricing Method
Setting the Price
Step 6 : Selecting the final price
Adapting the Price
 Geographical Pricing(Cash,
Countertrade, Barter)
 Price Discounts and Allowances
 Promotional Pricing
 Differentiated Pricing
Initiating and Responding to
Price Changes
 Initiating Price Cuts
 Initiating Price Increases
 Anticipating Competitive Responses
 Responding to Competitors’ Price
Changes