Professional Documents
Culture Documents
Chapter 10
What is Price?
Price Has Many Names
10- 2
Definition
Price
The amount of money charged for
a product or service, or the sum
of the values that consumers
exchange for the benefits
of having or using the
product or service.
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What is Price?
10- 4
Factors Affecting Price
Decisions
10- 5
Factors to Consider When
Setting Price
Market positioning
Internal Factors influences strategy
Other pricing objectives:
Marketing Survival
objectives Current profit
maximization
Marketing mix Market share leadership
strategies Product quality
leadership
Costs
Not-for-profit objectives:
Organizational Partial or full cost
considerations recovery
Social pricing
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Factors to Consider When
Setting Price
Pricing must be
Internal Factors carefully coordinated
with the other
Marketing marketing mix
objectives elements
Marketing mix Target costing is often
strategies used to support
product positioning
Costs strategies based on
Organizational price
considerations Nonprice positioning
can also be used
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Factors to Consider When
Setting Price
Types of costs:
Internal Factors Variable
Fixed
Marketing Total costs
objectives
How costs vary at
Marketing mix different production
strategies levels will influence
Costs price-setting
Organizational Experience (learning)
considerations curve effects on price
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Factors to Consider When
Setting Price
Who sets the price?
Internal Factors Small companies: CEO
or top management
Marketing Large companies:
objectives Divisional or product
Marketing mix line managers
strategies Price negotiation is
common in industrial
Costs
settings
Organizational Some industries have
considerations pricing departments
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Factors to Consider When
Setting Price
Types of markets
External Factors Pure competition
Monopolistic competition
Nature of market Oligopolistic competition
and demand Pure monopoly
Competitors’ Consumer perceptions
costs, prices, of price and value
and offers Price-demand
Other relationship
environmental Demand curve
elements Price elasticity of demand
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Factors to Consider When
Setting Price
Consider competitors’ costs,
External Factors prices, and possible
reactions when developing a
pricing strategy
Nature of market Pricing strategy influences
and demand the nature of competition
Low-price low-margin
Competitors’ strategies inhibit
costs, prices, competition
and offers High-price high-margin
strategies attract
Other competition
Benchmarking costs against
environmental the competition is
elements recommended
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Factors to Consider When
Setting Price
Economic conditions
External Factors Affect production costs
Affect buyer perceptions
Nature of market of price and value
and demand Reseller reactions to
Competitors’ prices must be
considered
costs, prices,
Government may limit or
and offers restrict pricing options
Other Social considerations
environmental may be taken into
elements account
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Major Considerations
in Setting Price
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General Pricing
Approaches
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Value-based
pricing
uses buyers’
perceptions of
value, not sellers’
cost, as the key to
pricing.
Cost-Based Versus
Value-Based Pricing
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General Pricing
Approaches
Competition-Based Pricing:
Also called going-rate pricing
May price at the same level, above,
or below the competition
Bidding for jobs is another variation
of competition-based pricing
Sealed bid pricing
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