Lecture 1

• Price


  The amount of money charged for a product or service, or the sum of the values consumers exchange for the benefits of having or using the product or service
• Price


  • The only element of the marketing mix that produces revenue
  • It's the most flexible element
• Major pricing strategies


  • Customer value-based pricing
  • Cost-based pricing
  • Competition-based pricing

  
• Customer value-based pricing


  Setting the price based on buyers' perceptions of value, rather than on the seller's cost

  
• Customer value-based pricing


  • Price is set before the marketing programme is set
  • Company must ascertain how much customers value a product and are prepared to pay

  
• Cost-based pricing


  Setting prices based on the costs of producing, distributing and selling the product, plus a fair rate of return for the company's effort and risk

  
• Cost-based pricing


  • Cost-plus pricing (markup pricing)
  • Breakeven pricing (target-return pricing)

  
• Competition-based pricing


  Setting prices based on competitors' strategies, costs, prices and market offerings

  
• Considerations in setting price

  • Overall marketing strategy, objectives mix
  • Organisational considerations
  • The market and demand
  • The economy
  • Other external factors

  
• New product pricing strategies

  • Market-skimming pricing
  • Market-penetration pricing
• Product-mix pricing strategies


  • Product-line pricing
  • Optional-product pricing
  • Captive-product pricing
  • By-product pricing
  • Product-bundle pricing

  
• Price-adjustment strategies


  • Discount and allowance pricing
  • Segmented pricing
  • Psychological pricing
  • Promotional pricing
  • Geographical pricing
  • Dynamic and personalised pricing

  
• Initiating price changes


  1. Initiating price cuts

  2. Initiating price increases
• Buyer and competitor reactions to price changes

  • Buyer reactions to price changes
  • Competitor reactions to price changes
• Public policy and pricing

  • Pricing within channel levels
  • Pricing across channel levels
• Consider - the customer pays the price