The exchange value of a good or service in the marketplace
Several major influences are considered when establishing price: Nature of the Market (Market Structure) Consumer Demand Production and Marketing Costs Channel Member Profit Expectations
Consumer Demand Pricing Elastic Demand – A situation where a small change in price results in a large change in volume. Example: A price increase of 10% results in a volume decrease of 25%. In this case total revenues would go down. Inelastic Demand – A situation in which a change in price does not have a significant impact on the quantity purchased. Example: A price increase of 5% results in a volume decrease of only 2%. In this case total revenues would go up.
Cost Influences Pricing Production, marketing, and other costs must be considered when establishing price. To protect profit margins a manufacturer will consider programs to reduce costs .
Competition Based Pricing Above competition Equal to competition Below competition
Typically, there are three basic pricing objectives : Maximizing Profit Maximizing Sales Volume Establishing a Competitive Position
TACTICS Captive-Product Pricing – Adding ancillary or captive products that facilitate use of the original product; for example, a low priced cell phone my require an high priced plan. Product-Bundling Pricing – The seller bundles products and features at t a set price. Bundling makes a package look attractive.
Psychological Pricing Prestige Pricing - A situation where a high price contributes to the image of a product and to the status of the buyer. Odd-Even Pricing Customary Pricing Price Lining - The retailer is satisfied with an average profit margin in a certain price range even though the cost of individual suits may vary in that price range. Unit Pricing - unit of measurement (cost per gram or cost per millilitre). How does the college price their ‘products’?
Pricing Decisions for Marketing
Pricing Decisions (part of the marketing mix) Presented by Lindsey Fair