2. What is price ?
Price is the one element of the marketing mix that produces
revenue
The amount paid for some goods and services.
Pricing is the process whereby a business sets the
price at which it will sell its products and services.
3. Steps in setting price
Selecting the final price
Selecting a pricing method
Analyze competitors’ price , costs and offers
Estimate costs
Determine demand
Select the Price Objective
4. Step 1: Selecting the Pricing Objective
Survival
Maximum current profit
Maximum market share
Maximum market skimming
Product-quality leadership
Clearer a firms’ objectives, easier it is to set the price.
There are five major objective are :
5. Step 2: Determining Demand
Price
demand
Sensitive :
regular items
Less sensitive:
no substitute,
Addiction,
infrequently
used items
Price
Sensitivity
Surveys
Price
experiments
Statistical
analysis
Estimating
demand
curve
Elastic demand
Inelastic demand
Price
elasticity
of demand
6. Step 3: Estimating Costs
Fixed
Cost
Variable
Cost
Total
Cost
Price which covers at least total
cost of production at the given
level of production is selected.
9. Step 5: Selecting a Pricing
Method
• costs set floor to the price
• competitors prices and substitute prices provide an
orienting point.
• customers’ assessment of unique features establishes
ceiling price.
Consideration in price setting : 3C’s
• Markup pricing
• Target-return pricing
• Perceived-value pricing
• Value pricing
• Everyday low pricing
• Going rate pricing
• Auction-type pricing
Price setting methods :
10. Step 6: Selecting The Final Price
Pricing methods narrow the range from which company must
select its final price.
Too high
few
buyers
Priced right
???
Too low
Too many buyers