Pricing Concepts Setting the Right Price

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Pricing ConceptsSetting the Right Price
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The Importance of Price
To the consumer...Price is the cost of something
To the seller...Price is revenue and profit
source
In the broadest sense, price allocates resources
in a free-market economy
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The Importance of Price
Marketers must select a price that is not too
high or not too low, a price that equals the
perceived value to target consumers
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Demand and Supply
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The Demand Curve
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The Supply Curve
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Equilibrium Price
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Elasticity of Demand
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Elasticity of Demand
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Elasticity of Demand
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Factors that Affect Elasticity
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The Cost Determinant of Price
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The Cost Determinant of Price
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Markup Pricing
Profit Maximization
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Break-Even Pricing
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Break-Even Pricing
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Other Determinants of Price
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Stages in the Product Life Cycle
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Distribution Strategy
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Regaining Price Control
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The Impact of the Internet

• Allows price and product comparisons
• Prices are coming down
• Data collection allows sellers to tailor products
  and prices

Extranet
A private electronic network that links a company
with its suppliers and customers.
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Indicators of Quality
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Steps in Setting the Right Price
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Pricing Objectives
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Price Strategy
A basic, long-term pricing framework, which
establishes the initial price for a product and
the intended direction for price movements over
the product life cycle.
Choosing a Price Strategy
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Price Skimming
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Penetration Pricing
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Status Quo Pricing
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Tactics for Fine-Tuning the Base Price
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Tactics for Fine-Tuning the Base Price
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Value-Based Pricing
The price is set at a level that seems to the
customer to be a good price compared to the
prices of other options.
Trade Loading
The practice of temporarily lowering the price to
induce wholesalers and retailers to buy more
goods than can be sold in a reasonable time.
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Geographic Pricing
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Geographic Pricing
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Special Pricing Tactics