A price is defined both narrowly as the amount paid for a product or service, and broadly as the sum of all values consumers exchange, including time, cognitive, emotional, and transaction costs. Prices are affected by internal factors like a company's costs, marketing strategy, demand curves, and external factors like competitors' prices, the economy, inflation, and purchasing power. Setting prices requires considering costs, demand, competition, and the broader economic environment.

1. Pricing

2. What Is a Price?
• Narrow Definition: The amount of money
charged or paid for a product or service.
• Broad Definition: The sum of all values
consumers exchange for the product or
service.
– Time Costs
– Cognitive and Emotional Costs
– Transaction Costs

3. Internal and External Factors Affect Prices

4. • Company and Product Costs:
– Fixed Costs:
• Costs that do not vary with production or sales level.
– Variable Costs:
• Costs that vary directly with the level of production.
Internal Factors Affecting Pricing Decisions

5. • Marketing Mix Strategy:
– Price must be coordinated with the other three
P’s (Product, Promotion and Place) to form a
consistent and effective marketing program.
Internal Factors Affecting Pricing Decisions

6. • The Market and Demand:
– Costs set price floors; demand sets price ceilings.
– Supply and Demand Curves
– Pricing in different types of markets:
• Pure competition
• Monopolistic competition
• Oligopolistic competition
• Pure monopoly
– Price elasticity of demand.
– Cross price elasticity of demand.
External Factors Affecting Pricing Decisions

7. External Factors Affecting Pricing Decisions
• Competition’s Prices Affect Our Price
– What are our competitors charging? How and Why?
– Will our pricing attract, restrict, or drive out competitors?
– How does our value compare to the competition’s?
– How strong/permanent are current competitors?
– How does competition influence price sensitivity?
– Avoiding price wars
• Other External Factors
– Economy
• Inflation
• Purchasing Power
• Business Cycle (Boom, Recession, Depression)
• Counter-cyclical products