Pricing (price policy)

• How do consumers process and evaluate prices?

• How should a company set prices initially for products and services?

• How should a company adapt prices to meet varying opportunities:

• When should company initiate a price change?

Price is...

• Price is the one element of the marketing mix that produces revenue – the other elements produce costs.

• Prices are perhaps the easiest element of the marketing program to adjust.

• Throughout most of history, prices were set by negotiation between buyers and sellers. Bargaining is still a sport in some areas.

How companies price?

• Factors of pricing:

Internal factors

External factors

Perception of price

• Reference prices: comparing an observed price to an internal reference price which customers remember or to an external frame of reference such as a posted „regular retail price.“

• Price-quality inferences: many consumers use price as an indicator of quality

• Price endings: Prices that end with 0 and 5 are common in market place. Also ending with „9“ is very popular.

The three major considerations in price setting: costs set a flooor to the price. Competitor´s prices and the price of substitutes provide an orienting point. Consumers ´ assessment of unique features establishes the price ceiling.

Selecting the final price

• Impact of other marketing activities

• Company pricing policies

• Gain-and-risk sharing pricing

• Impact of price on other parties

Adapting the price

1. Geographical pricing

2. Price discounts and allowances

3. Promotional pricing

4. Differentiated pricing