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‡ Is a key factor in producing revenue for the firm

‡ Is the easiest of all marketing variables to change
‡ Is an important consideration in competitive intelligence
‡ Is considered to be the only means of differentiation in
highly commoditized markets
‡ Is among the most complex decisions in the marketing
plan

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‡ The Seller¶s Perspective on Pricing
± Four key issues:
‡ Costs
‡ Demand
‡ Customer value
‡ Competitors¶ prices
‡ The Buyer¶s Perspective on Pricing
± Two key issues:
‡ Perceived value
‡ Price sensitivity

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‡ A Shift in the Balance of Power
± A buyer¶s market occurs when:
‡ Large number of sellers in the market
‡ Many substitutes for the product
‡ Economy is weak
± A seller¶s market occurs when:
‡ Products are in short supply
‡ Products are in high demand
‡ Economy is strong

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‡ Myth #1 ± When business is good, a price cut will
increase market share.
‡ Myth #2 ± When business is bad, a price cut will
stimulate sales.

‡ Price cutting is generally not in the best interests of

the firm unless sales volume will increase.
‡ A better strategy is to build value into the product
offering at the same (or even a higher) price.

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‡ Pricing Objectives
‡ Supply and Demand
‡ The Firm¶s Cost Structure
‡ Competition and Industry Structure
± Pure Competition
± Monopolistic Competition
± Oligopoly
‡ Stage of the Product Life Cycle

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‡ Is critical because price may be the only cue to quality
‡ Becomes more important and difficult when:
± Service quality is hard to detect prior to purchase
± Costs are difficult to determine
± Customers are unfamiliar with the process
± Brand names are not well established
± Customers can perform the service themselves
± Service has poorly defined units of consumption
± Advertising within the service category is limited
± The total price of the service is difficult to state beforehand

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‡ Allows simultaneous control of capacity and
demand
± Control capacity by limiting available capacity at certain
price points
± Control demand through price changes and overbooking
capacity

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‡ Situations that increase price sensitivity:
± Availability of product substitutes
± Higher total expenditure
± Noticeable differences
± Easy price comparison
‡ Situations that decrease price sensitivity:
± Real or perceived necessities
± Lack of product substitutes
± Complementary products
± Product differentiation
± Perceived product benefits
± Situational influences
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‡ Base Pricing Strategies

± Market Introduction Pricing (skimming and penetration)
± Prestige Pricing
± Value-Based Pricing
± Competitive Matching
± Non-Price Strategies
‡ Adjusting Prices in Consumer Markets
± Promotional Discounting
± Reference Pricing
± Odd-Even Pricing
± Price Bundling m

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‡ Adjusting Prices in Business Markets

± Trade discounts
± Discounts and allowances
± Geographic pricing
± Transfer pricing
± Barter and countertrade
± Price discrimination

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‡ Pricing levels in a negotiated pricing situation:

± Opening position
± Aspiration price
± Limit
‡ Guidelines for making concessions:
± Avoid being the first side to make a concession
± Start with modest concessions and make them smaller as
you proceed
± Avoid making concessions early in the negotiation
± Do not give up anything without something in return
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