Pricing

The final element

Price

Represents the value of a good or service for both the seller and the buyer

It describes all forms of purchase, both monetary and non-monetary

Price-planning

Systematic decision-making by an organization regarding all aspects of buying

Importance

Part of the exchange Deregulation Forms are more cost-conscious Global economy= greater interest in

currency valuations and exchange rates

In slow economies it is hard to raise prices

Relationship to other marketing elements

Prices vary over product life cycle Affects customer service Competitive with other firms, yet

profitable Sales force may need flexibility As costs change, prices or other

features may need to change

Approaches

Price-based Non-price based

Factors affecting price Demand Costs Government regulations (FTC)

Price fixing Price discrimination Unfair sales acts Unit pricing Price advertising

Channel members Competition

Developing and applying a pricing strategy

Pricing objectives

Sales-based Profit-based

Broad price policy

Sets the overall direction and tone for a firm’s pricing efforts and makes sure pricing decisions are coordinated with the firm’s choices as to a target market, an image, and other marketing mix factors

Methods of setting prices

Cost-based pricing Demand based pricing Competition based pricing

Cost-based pricing

Cost-plus pricing Cost of the item + desired profit=

price

Demand-based pricing

A firm sets prices after studying consumer desires and prices acceptable to the target market Demand-minus pricing Chain markup pricing Price discrimination

Competition-based pricing

Using competitors’ pricing rather than demand or cost considerations as primary pricing guideposts Price above Price below Meet competition

Price leadership

Considerations in implementing a price strategy

Customary vs. variable pricing One price vs. flexible pricing Odd pricing Price-quality association Leader pricing Multiple unit pricing Price lining Price bundling Geographic pricing Purchase terms Price adjustments

Customary vs. variable pricing

Customary pricing a firm sets prices and seeks to maintain them for an extended period of time

Variable pricing- lets a firm intentionally lower or raise prices in response to cost fluctuations or differences in consumer demand

One price policy vs. flexible pricing

One-price policy - lets a firm charge the same price to all customers seeking to purchase a good or service under similar conditions

Flexible pricing – a firm sets prices based on the consumer’s ability to negotiate or the buying power of a large customer

Odd pricing

Set prices below even dollar amounts

Price-quality association

Consumer may believe high prices represent high quality and low prices represent low quality Prestige pricing

Leader pricing

Price select items low to attract customers

Multiple-unit pricing

A firm offers discount to customers to encourage them to buy in quantity, as to encourage overall sales volume

Price lining

Involves selling products within a range of prices, with each representing a distinct level of quality or features Benefits Constraints

Price bundling

Sell a basic product, options, and customer service for one total price

Geographic pricing

FOB mill or factory FOB destination Uniform delivered Zone pricing Base-point pricing

Purchase terms

Discounts Payment timing

Price adjustments

List prices Escalator clauses Surcharges Additional markups Markdowns Rebates