This document discusses pricing decisions and strategies for companies. It outlines 6 steps in setting prices: 1) selecting a pricing objective, 2) determining demand, 3) estimating costs, 4) analyzing competitors' prices, 5) selecting a pricing method, and 6) selecting the final price. It describes various pricing methods like markup pricing, target-return pricing, and perceived-value pricing. It also discusses ways to adapt prices through discounts, promotions, and differentiated pricing strategies.

1. Pricing Decisions
BY SHAHID
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2. Chapter Questions
• How do consumers process and evaluate
prices?
• How should a company set prices initially
for products or services?
• How should a company adapt prices to
meet varying circumstances and
opportunities?
• How should a company respond to a
competitor’s price challenge?

3. Steps in Setting Price
• Select the price objective
• Determine demand
• Estimate costs
• Analyze competitor price mix
• Select pricing method
• Select final price

4. Step 1: Selecting the Pricing Objective
• Survival
• Maximum current profit
• Maximum market share
• Maximum market skimming
• Product-quality leadership

5. Step 2: Determining Demand
• Price sensitivity
• Estimate demand curves
• Price elasticity of demand

6. Figure 13.1 Inelastic and
Elastic Demand

7. Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall
Step 3: Estimating Costs
• Types of costs
1. Fixed Cost
2. Variable Cost

8. Figure 13.2 Cost Per Unit at Different
Levels of Production

9. Cost Terms and Production
• Fixed costs
• Variable costs
• Total costs
• Average cost
• Cost at different levels of
production

10. Step 4: Analyzing Competitor’s Costs
 Competitors’ costs
 Competitors’ prices
 Possible price reactions

11. Step 5: Selecting a Pricing Method
• Markup pricing
• Target-return pricing
• Perceived-value pricing
• Value pricing
• Going-rate pricing
• Auction-type pricing

12. Target-Return Pricing

13. Figure 13.5 Break-Even Chart for
Determining Target-Return Price
and Break-Even Volume

14. Perceived-Value Pricing
Customer’s perceived-value
 Performance
 Warranty
 Customer support
 Reputation

15. Step 6: Selecting the Final Price
• Impact of other marketing activities
• Company pricing policies
• Gain-and-risk sharing pricing
• Impact of price on other parties

16. Price Discounts and Allowances
• Discount
• Quantity discount
• Functional discount
• Seasonal discount
• Allowance

17. Promotional Pricing Tactics
• Loss-leader pricing
• Special-event pricing
• Special customer pricing
• Cash rebates
• Low-interest financing
• Longer payment terms
• Warranties and service contracts
• Psychological discounting

18. Differentiated Pricing
• Customer-segment pricing
• Product-form pricing
• Image pricing
• Channel pricing
• Location pricing
• Time pricing
• Yield pricing