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Price
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The amount of money exchanged for a good or service
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Importance of Price
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- Only aspect of marketing mix that directly generates revenue
- Consumers consistently rank price as one of the most important factors influencing purchase decisions
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Price elasticity
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% change in quantity demanded / % change in price
Elastic = sensitive and Inelastic = Insensitive
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Three major pricing strategies
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1. Customer value-based pricing
2. Cost-based pricing
3. Competition-based pricing
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External factors affecting a firm’s pricing decisions
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...
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Internal factors affecting a firm’s pricing decisions
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Consumers have a set price or price range in their mind
• If the actual price is higher, consumers will feel the product is overpriced
• If it is too low below the internal reference price, consumers may assume its quality is inferior