What Is A Price?
Price is the sum of all the values that consumers exchange for the benefits of having or using the product or service.
Internal Factors Affecting Pricing Decisions
(Marketing Objective)
1) Survival
2) Current Profit Maximisation
3) Market Share Leadership
4) Product Quality Leadership
Marketing Mix Strategy
Price Decisions must be coordinated with product design, distribution, and promotion decisions to form a consistent and effective marketing program.
Organizational Considerations
Must decide who within the organization should set prices.
This will vary depending on the size and type of company.
External Factors Affecting Pricing Decisions and the Nature of Market and Demand
1) Costs set the lower limit of prices while the market and demand set the upper limit.
2) Competition
3) Use as a benchmark to set own prices
4) Set prices competitively Other environmental factors
5) Recessions or boom affect customers’ ability to spend
6) Diseases/drought/flood affect supply of livestock and fruits/vegetables
7) Government
8) Social concerns
3) Use as a benchmark to set own prices
4) Set prices competitively Other environmental factors
5) Recessions or boom affect customers’ ability to spend
6) Diseases/drought/flood affect supply of livestock and fruits/vegetables
7) Government
8) Social concerns
1) Psychological Pricing
Considers the psychology of prices and not simply the economics.
Consumers usually perceive higher-priced products as having higher quality.
Consumers use price less when they can judge quality of a product.
Consumers usually perceive higher-priced products as having higher quality.
Consumers use price less when they can judge quality of a product.
2) Promotional Pricing
Temporarily pricing products below list price and sometimes even below cost to create buying excitement and urgency.
Approaches: –
Approaches: –
--> Special-Event Pricing: Sellers will also use special-event pricing in certain seasons to draw more customers.
-–> Cash Rebates: Manufacturers sometimes offer cash rebates to consumers who buy a product from dealers within a specified time; the manufacturer sends the rebate directly to the customer
-– >Low-Interest Financing: Some manufacturers offer low-interest financing, longer warranties, or free maintenance to reduce the customer’s “price.”
-– >Longer Warranties
-–> Free Maintenance
-–> Discounts: Seller may simply offer discounts from normal prices to increase sales and reduce inventories
-– >Loss Leaders: With promotional pricing, companies will temporarily price their products below list price and sometimes even below cost to create buying excitement and urgency.