Q4 M2

• In the past, price has been the major factor affecting buyer choice. This is still the case in poorer countries, among less affluent groups and with commodity products. However, non-price factors have become more important in buyer choice behavior in recent decades.
• Fixed-price policies


  Setting one price for all buyers, a relatively modern idea that evolved with the development of large-scale retailing at the end of the nineteenth century.
• Price is the only element in the marketing mix that produces revenue; all other elements represent costs.
• Price is also one of the most flexible elements of the marketing mix. Unlike product features and channel commitments, price can be changed quickly.
• Pricing and price competition is the number one problem facing many marketers. Yet, many companies do not handle pricing well.
• Internal factors affecting pricing decisions

  • Marketing objectives
  • Marketing-mix strategy
  • Costs
  • Organization for pricing
• External factors affecting pricing decisions

  • Nature of the market and demand
  • Competition
  • Other environmental factors (economy, resellers, government)
• Factors to Consider When Setting Prices

  Internal company factors and external environmental factors
• Pricing Decisions

  1. Internal factors

  2. External factors
• Internal factors affecting pricing

  • Marketing objectives
  • Marketing-mix strategy
  • Costs
  • Organization for pricing
• Marketing Objectives


  company decide on its strategy for the product
• Examples of common objectives

  • Survival
  • Current profit maximization
  • Market-share maximization
  • Product-quality leadership
• Marketing-mix Strategy


  Price is only one of the marketing-mix tools that a company uses to achieve its marketing objectives
• Decisions made for other marketing-mix variables may affect pricing decisions
• Target costing


  A technique where a target cost is set first, and then the product is designed to meet that cost
• Costs


  Set the floor for the price that the company can charge for its product
• Fixed costs


  Costs that do not vary with production or sales level
• Variable costs


  Costs that vary directly with the level of production
• Total costs


  The sum of the fixed and variable costs for any given level of production
• Organizational Considerations


  management must decide who within the organization should set prices
• External factors affecting pricing decisions


  • The market and demand
  • competitor's costs prices and offers
  • other external factors
• The Market and Demand

  Costs set the lower limit of prices, the market and demand set the upper limit
• Types of marketunder:


  • Pure competition
  • Monopolistic competition
  • Oligopolistic competition
  • Pure monopoly
• Competitors' Costs, Prices, and Offers


  Another external factor affecting the company's pricing decisions
• Other External Factors

  • Economic conditions
  • Resellers
  • Government
  • Social concerns
• New Product Pricing Strategies

  Pricing strategies usually change as the product passes through its life cycle
• Economic factors such as boom or recession, inflation and interest rates affect pricing decisions because they affect both the costs of producing a product and consumer perception of the product's price and value
• The company must consider what impact its prices will have on other parties in its environment, such as how resellers will react to various prices
• The government is another important external influence on pricing decisions
• Social concerns may have to be considered when setting prices, as a company's short-term sales, market share and profit goals may have to be tempered by broader societal considerations
• Introductory stage (of a product's life cycle)


  Especially challenging for pricing strategies
• Imitative new product


  Product that imitates existing products
• Innovative product


  Product that is patent protected
• Four possible positioning strategies


  • Premium pricing strategy
  • Economy pricing strategy
  • Good-value strategy
  • Overcharging strategy
• The good-value strategy represents a way to attack the premium pricer
• Price


  • The amount of money charged for a product or service
  • The sum of all the values that consumers exchange for the benefits of having or using a product or service
• Price is the major factor affecting buyer choice
• Price is the only element in the marketing mix that represents revenue
• Factors to consider when setting prices


  • Internal factors
  • External factors

  
• Internal factors


  • Marketing objectives
  • Marketing-mix strategy
  • Costs
  • Organizational considerations