3. Marketing Strategies
Conditions Under Which Consumers are
Less Price Sensitive:
• Product is more distinctive
• Buyers are less aware of substitutes
• Buyers cannot easily compare quality
of substitutes
• The expenditure is a lower part of
buyer’s total income
• The expenditure is small compared to
the total cost
• Part of the cost is borne by another
party
• The product is used with assets
previously bought
• The product is assumed to have
more quality, prestige, or
exclusiveness
• Buyers cannot store the product
4. Marketing Strategies
Conditions Under Which Demand
is Less Elastic:
• There are few or
no substitutes
• Buyers do not readily
notice the higher price
• Buyers are slow to
change their buying
habits and search for
lower prices
• Buyers think higher
prices are justified
5. Setting the Price
Pricing Procedure
• Select pricing objective
• Determine demand
• Estimate costs
• Analyze competition
• Select pricing method
• Select final price
• Types of costs and levels
of production must be
considered
• Accumulated production
leads to cost reduction via
the experience curve
• Differentiated marketing
offers create different cost
levels
6. Key Pricing Terms:
Fixed costs: do not vary directly with changes in level
of production
Variable costs: vary with production
Total costs: sum of fixed and variable costs a given
level of production
Average cost: cost per unit at a given level of
production
Setting the Price
7. Setting the Price
Pricing Procedure
• Select pricing objective
• Determine demand
• Estimate costs
• Analyze competition
• Select pricing method
• Select final price
• Firms must analyze the
competition with respect
to:
• Costs
• Prices
• Possible price reactions
• Pricing decisions are also
influenced by quality of
offering relative to
competition
8. Setting the Price
Pricing Procedure
• Select pricing objective
• Determine demand
• Estimate costs
• Analyze competition
• Select pricing method
• Select final price
• Price-setting begins with
the three “C’s”
• Select method:
• Markup pricing
• Target-return pricing
• Perceived-value pricing
• Value pricing
• Going-rate pricing
• Auction-type pricing
• Group pricing
9. Setting the Price
Pricing Procedure
• Select pricing objective
• Determine demand
• Estimate costs
• Analyze competition
• Select pricing method
• Select final price
• Requires consideration of
additional factors:
• Psychological pricing
• Gain-and-risk-sharing pricing
• Influence of other marketing
mix variables
• Company pricing policies
• Impact of price on other
parties