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    Principles of Marketing: Seventeenth Edition

    Uploaded by

    Tehreem Khizra

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    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd

    Principles of Marketing: Seventeenth Edition

    Uploaded by

    Tehreem Khizra
    87 views18 pages

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    Copyright:

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    Download as pptx, pdf, or txt
    87 views18 pages

    Principles of Marketing: Seventeenth Edition

    Uploaded by

    Tehreem Khizra

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    of 18

    Principles of Marketing

    Seventeenth Edition

    Chapter 10

    Pricing: Understanding and


    Capturing Customer Value

    Copyright © 2018 Pearson Education Ltd. All Rights Reserved.


    Learning Objectives
    10-1 “What is a price?” and discuss the importance of pricing in today’s fast-
    changing environment.
    10-2 Identify the three major pricing strategies and discuss the importance of
    understanding customer-value perceptions, company costs, and
    competitor strategies when setting prices.
    10-3 Identify and define the other important external and internal factors
    affecting a firm’s pricing decisions.

    Copyright © 2018 Pearson Education Ltd. All Rights Reserved.


    Learning Objective 1
    Answer the question “What is a price?” and discuss the importance of pricing
    in today’s fast-changing environment.

    Copyright © 2018 Pearson Education Ltd. All Rights Reserved.


    What Is a Price?
    Price is the amount of money charged for a product or service. It is
    the sum of all the values that consumers give up in order to
    gain the benefits of having or using a product or service.

    Price is the only element in the marketing mix that produces


    revenue
    • all other elements represent costs

    Copyright © 2018 Pearson Education Ltd. All Rights Reserved.


    Learning Objective 2
    Identify the three major pricing strategies and discuss the importance of
    understanding customer-value perceptions, company costs, and competitor
    strategies when setting prices.

    Copyright © 2018 Pearson Education Ltd. All Rights Reserved.


    Major Pricing Strategies

    Copyright © 2018 Pearson Education Ltd. All Rights Reserved.


    Major Pricing Strategies

    Copyright © 2018 Pearson Education Ltd. All Rights Reserved.


    Major Pricing Strategies
    Customer Value-Based Pricing
    Value-based pricing uses the buyers’ perceptions of value rather than the
    seller’s cost.
    • Value-based pricing is customer driven.
    • Cost-based pricing is product driven.
    • Price is set to match perceived value.

    Copyright © 2018 Pearson Education Ltd. All Rights Reserved.


    Major Pricing Strategies
    Customer Value-Based Pricing
    • Good-value pricing is offering just the right combination of
    quality and good service at a fair price.
    • Everyday low pricing (EDLP) involves charging a constant everyday
    low price with few or no temporary price discounts.
    • High-low pricing involves charging higher prices on an everyday basis
    but running frequent promotions to lower prices temporarily on selected
    items.
    • Value-added pricing attaches value-added features and services to
    differentiate the companies offers and thus their higher prices.

    Copyright © 2018 Pearson Education Ltd. All Rights Reserved.


    Major Pricing Strategies
    Cost-Based Pricing
    Cost-based pricing sets prices based on the costs for producing, distributing, and selling the product plus a
    fair rate of return for effort and risk.

    Fixed costs are the costs that do not vary with production or sales level.
    •Rent
    •Heat
    •Interest
    •Executive salaries

    Variable costs vary directly with the level of production.


    • Raw materials
    • Packaging

    Total costs are the sum of the fixed and variable costs for any given level of production.
    Copyright © 2018 Pearson Education Ltd. All Rights Reserved.
    Major Pricing Strategies
    Cost-Based Pricing
    Break-even pricing (target return pricing) is setting
    price to break even on costs or to make a target return.

    Figure 10.5 Break-Even Chart for Determining Target


    Return Price and Break-Even Volume.

    Copyright © 2018 Pearson Education Ltd. All Rights Reserved.


    Major Pricing Strategies
    Cost-Based Pricing
    Cost-plus pricing adds a standard markup to the cost of the product.
    • Benefits
     Sellers are certain about costs.
     Price competition is minimized.
     Buyers feel it is fair.
    • Disadvantages
     Ignores demand and competitor prices

    Copyright © 2018 Pearson Education Ltd. All Rights Reserved.


    Major Pricing Strategies

    Copyright © 2018 Pearson Education Ltd. All Rights Reserved.


    Learning Objective 3
    Identify and define the other important external and internal factors affecting a
    firm’s pricing decisions.

    Copyright © 2018 Pearson Education Ltd. All Rights Reserved.


    Other Considerations Affecting Price Decisions
    The Market and Demand
    Pricing In Different Types of Markets

    Pure competition
    Monopolistic competition
    Oligopolistic competition
    Pure monopoly
    Copyright © 2018 Pearson Education Ltd. All Rights Reserved.
    Other Considerations Affecting Price Decisions

    The Market and Demand


    Analyzing the Price–Demand Relationship
    The demand curve shows the number of units the market will buy in a given
    period at different prices
    • Demand and price are inversely related.
    • Higher price = lower demand

    Copyright © 2018 Pearson Education Ltd. All Rights Reserved.


    Other Considerations Affecting Price Decisions

    The Market and Demand


    Price Elasticity of Demand
    Price elasticity is a measure of the sensitivity of demand to changes in price.
    Inelastic demand is when demand hardly changes with a small change in price.
    Elastic demand is when demand changes greatly with a small change in price.

    Copyright © 2018 Pearson Education Ltd. All Rights Reserved.


    Other Considerations Affecting Price Decisions
    The Economy and Other External Factors

    Economic conditions

    Reseller’s response to price

    Government

    Social concerns

    Copyright © 2018 Pearson Education Ltd. All Rights Reserved.

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