MARKETING AN INTRODUCTION

9 Armstrong/Kotler

Pricing
Understanding and Capturing Customer
Value

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 Chapter Outline
• What is a Price?
• Customer Perceptions of Value
• Company and Product Costs
• Other Internal and External Considerations
Affecting Price Decisions
• New-Product Pricing
• Product Mix Pricing
• Price-Adjustment Strategies
• Price Changes
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 What is Price

Price is the amount of money charged for a

product or service, or the sum of the
values that customers exchange for the
benefits of having or using the product or
service.

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 Major Pricing Strategies

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 Customer Value-Based Pricing

Customer Value-Based Pricing

Buyer’s Perceptions of Value

Good-value Value-added
pricing pricing

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 Discussion Question

What are the

challenges to a
marketer who
uses value-based
pricing?

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 Cost-Based Pricing

Cost-Based Pricing
Setting Price Based on Costs

Cost-Plus Breakeven
Pricing Pricing

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 Breakeven Pricing

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 Types of Costs

Fixed Variable Total

Costs Costs Costs

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 Discussion Question

Consider the lunch

you purchased
today. To the
restaurant, what
were variable and
fixed costs for your
meal?
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 Value-Based versus Cost-Based Pricing

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 Internal and External Considerations
Affecting Price Decision

Overall Marketing
Strategy, Organizational
The Economy
Objectives, and Considerations
Mix

The Market and

The Government Social Concerns
Demand

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 Pricing in Different Types of Markets

Monopolistic
competition

Pure Oligopolistic
competition competition

Pricing

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 Analyzing the Price-Demand Relationship -
Demand Curve

Price elasticity –
the change in
demand with
the change in
price:
– Elastic
– Inelastic
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 Discussion Question

What products
have inelastic
demand? Elastic?

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 New-Product Pricing

Market-skimming
pricing

Market-penetration
pricing
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 PRODUCT MIX PRICING

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 PRICE ADJUSTMENTS

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 Initiating Price Changes

Initiating
Initiating
Price
Price Cuts
Increases

Buyer Competitor
Reactions to Reactions to
Price Changes Price Changes

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 Responding to Price Changes

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 PUBLIC POLICY AND PRICING

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 Pricing within Channel Levels

Prohibited
Price fixing – talking with
competitors to set prices

Predatory pricing – selling below

cost with the intention of
punishing a competitor or putting
them out of business

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 Pricing across Channel Levels

Prohibited
Price discrimination – ensure
same price to customers at
given level of trade

Price maintenance – requiring

dealers to charge a specified
retail price

Deceptive pricing – seller

states price that may mislead
customers
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