out of the 4Ps (product, promotion, price and place), price is the only one that generate revenue, whereas others demand cost
a graph of the relationship between the price of a good and the quantity demanded
shows the number of units the market will buy in a given time period at different prices that might be charged
Customer perceptions of the product’s value set the ceiling for its price;
If customers perceive that the product’s price is greater than its value, they will not buy the product
price floor
product costs set the floor for a product’s price.
If the company prices the product below its costs, the company’s profits will suffer.
pricing begins with analyzing consumer needs and value perceptions, and the price is set to match perceived value
process: design a product, adds up the product cost, and sets a price that covers cost plus a target profit. Marketing must convince buyers that the price justifies the product value
value-based pricing
cost-based pricing
competition-based pricing
good-value pricing
value-added pricing
fixed costs
variable costs
costs that vary directly with the level of production (e.g.: phones chips, wires,
total costs
adding a standard markup to the cost of the product
simple, efficient, but not optimal
mark-up price = cost + (cost * mark-up-percentage)
EDLP
charging higher prices on an everyday basis but running frequent promotions to lower prices temporarily on selected items
- early bird's saving; sale days
the market consists of many buyers and sellers trading in a uniform commodity
No single buyer or seller has much effect on the going market price
the market consists of many buyers and sellers trading over a range of prices rather than a single market price
try to develop differentiated offers for different customer segments
freely use branding, advertising, and personal selling to set their offers apart
only a few large sellers;
each seller is alert and responsive to competitors’ pricing strategies and marketing moves
price becomes a major competitive tool
market dominated by one seller
small change in price = no or little change in demand
elastic
small change in price = great change in demand
seller consider lowering their price = more total revenue
set a low initial price to penetrate the market quickly and deeply—to attract a large number of buyers quickly and win a large market share
Preconditions:
1. the market is price sensitive so that a low price produces more market growth
2. production and distribution costs must decrease as sales volume increases
3. low price must help keep out the competition
new models starts at a high price and older models are discounted
Preconditions:
1. the product must be worth the higher price
2. competitors can not enter the market easily and undercut the high price
e.g.: Apple
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