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Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 13-1
Pricing Strategie
s
Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 13-2
CHAPTER OBJECTIVES
1. What are the roles of price and value in the marketing mix? How do market structures, costs, and demand affect prices?
2. What are the most important market factors influencing pricing decisions?
3. How do marketers use pricing strategy and pricing objectives to achieve their goals?
4. What procedures and strategies do marketers use when making pricing decisions?
Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 13-3
OBJECTIVE 1
What are the roles of price and value in the marketing mix? How do market structures, costs, and demand affect prices?
DEFINED
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A Price is the exchange value of a
product or service in the marketplace.
EXPLAINED
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VALUE
Value = Benefits – Costs
Service Benefits
Brand Benefits
Product Benefits
Price &OtherCosts
Value
EXPLAINED
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Performance
APPLIED
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ESTABLISHING PRICES
Price
ProductPlace
Promotion
APPLIED
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MARKET STRUCTURE
Pure Competition
Oligopoly
Monopolistic Competition
Monopoly
APPLIED
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COST-BASED PRICING
Profit Revenue Costs
Price x Units Sold
Fixed Costs + Variable Costs
APPLIED
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COST-BASED PRICING
APPLIED
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COST-PLUS PRICING
Markup % Margin Selling Price
10% 11.0% $13.33
15% 17.6% $14.12
20% 25.0% $15.00
25% 33% $16.00
30% 42.8% $17.14
For a product costing $12.00…
APPLIED
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BREAK-EVEN POINT
Fixed Cost = $40k; Variable Cost = $5; Selling Price = $10
APPLIED
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DETERMINATION OF DEMAND
100K 200K 300K
Quantity
$0.50
Pri
ce$0.25
$0.10
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OBJECTIVE 2
What are the most important market factors influencing pricing decisions?
DEFINED
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Pricing Practices are considerations
(such as legal requirements or bidding
practices) that must be taken into
account when establishing a price for a
product or service.
EXPLAINED
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PRICING PRACTICES
APPLIED
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PRICING PRACTICES
APPLIED
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PRICE REDUCTION EFFECT
Kenneth Wisniewski and Robert Blattberg at the University of Chicago's Center for Research in Marketing
.89¢.71¢
66% Increase
.69¢
222% Increase
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OBJECTIVES 3 & 4
How do marketers use pricing strategy and pricing objectives to achieve their goals?
What procedures and strategies do marketers use when making pricing decisions?
DEFINED
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A Pricing Strategy identifies what
a business will charge for its products
or services.
EXPLAINED
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PRICING OBJECTIVES
Profitability$
$
$
$
APPLIED
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PRICING STRATEGY
APPLIED
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NEW PRODUCT PRICING
Skimming
APPLIED
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NEW PRODUCT PRICING
Penetration
APPLIED
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PRICING STRATEGIES
Storefront Pricing
Online Pricing
Tiered Pricing
Auction Pricing
Dynamic Pricing
APPLIED
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PORTFOLIO PRICING
Customer’s willingness to pay
Price ceiling $$$
Price floor $
Product 1
Product 2
Product 3
Pric
e ra
nge
for
bran
d/pr
oduc
t lin
e
APPLIED
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PRICE ADJUSTMENT STRATEGIES
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VISUAL SUMMARY
Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 13-29
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