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price
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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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customer value-based pricing
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setting price based on buyers' perceptions of value rather than on the seller's cost
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good-value pricing
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offering just the right combination of quality and good service at a fair price
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value-added pricing
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attaching value-added features and services to differentiate a company's offers and charging higher prices
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cost-based pricing
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setting prices based on the costs of producing, distributing, and selling the product plus a fair rate of return for effort and risk
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fixed costs (overhead)
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costs that do not vary with production or sales level
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variable costs
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costs that vary directly with the level of production
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total costs
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the sum of the fixed and variable costs for any given level of production
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experience curve (learning curve)
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the drop in the average per-unit production cost that comes with accumulated production experience
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cost-plus pricing (markup pricing)
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adding a standard markup to the cost of the product
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break-even pricing (target return pricing)
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setting price to break even on the costs of making and marketing a product, or setting price to make a target return
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competition-based pricing
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setting prices based on competitors' strategies, prices, costs, and market offerings
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target costing
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pricing that starts with an ideal selling price, then targets costs that will ensure that the price is met
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demand curve
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A curve that shows the number of units the market will buy in a given time period, at different prices that might be charged
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price elasticity
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a measure of the sensitivity of demand to changes in price
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Answer the question "What is price?" and discuss the importance of pricing in today's fast-changing environment.
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- narrow definition: the amount of money charged for a product or service
- broad definition: the sum of the values that consumers exchange for the benefits of having and using the product or service
- only element in the marketing mix that produces revenue
- strategic tool for creating and capturing customer value
- broad definition: the sum of the values that consumers exchange for the benefits of having and using the product or service
- only element in the marketing mix that produces revenue
- strategic tool for creating and capturing customer value
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Identify the three major pricing strategies and discuss the importance of understand customer-value perceptions, company costs, and competitor strategies when setting prices.
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customer value-based pricing: uses buyers' perceptions of value as the basis for setting price
- good-value pricing: offering just the right combination of quality and good service at a fair price
- value-added pricing: attaching value-added features and services to differentiate the company's offers and support charging higher prices
cost-based pricing: setting prices based on the costs for producing, distributing, and selling products plus a fair rate of return for effort and risk
- product driven
- cost-plus pricing and break-even pricing
competition-based pricing: setting prices based on competitors' strategies, costs, prices, and market offerings
- good-value pricing: offering just the right combination of quality and good service at a fair price
- value-added pricing: attaching value-added features and services to differentiate the company's offers and support charging higher prices
cost-based pricing: setting prices based on the costs for producing, distributing, and selling products plus a fair rate of return for effort and risk
- product driven
- cost-plus pricing and break-even pricing
competition-based pricing: setting prices based on competitors' strategies, costs, prices, and market offerings
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Identify and define the other important external and internal factors affecting a firm's pricing decisions.
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internal
- company's overall marketing strategy
- objectives
- decisions must be coordinated with product design, distribution, and promotion decisions
- who within the organization is responsible for setting price
external
- nature of the market and demand and environmental factors such as the economy, reseller needs, and gov actions
- demand curves and price elasticity
- economic conditions
- company's overall marketing strategy
- objectives
- decisions must be coordinated with product design, distribution, and promotion decisions
- who within the organization is responsible for setting price
external
- nature of the market and demand and environmental factors such as the economy, reseller needs, and gov actions
- demand curves and price elasticity
- economic conditions
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