PRICE

GRADE 12 – ABM 2

L O N GA S A , J U D IT H
P A C IB E, K I RL I A N
P L A Z A , J A C K IE L Y N J O S E
SABARIZA, ELACE MAE
DEFINITION OF
the quantity of one thing that is exchanged or
demanded in barter or sale for another.

the amount of money given or set as

consideration for the sale of a specified thing.

A value that will purchase a finite quantity,

weight, or other measure of a good or service.
PRICE IS DETERMINE BY WHAT:
 a buyer is willing to pay

a seller is willing to accept, and;

the competition is allowing to be

charged

http://www.businessdictionary.com/definition/price.html
 Relative to Marketing Mix

 PRICE the value that is put to a product or

service and is the result of a complex set of

calculations, research and understanding and risk
taking ability. It depends on costs of production,
segment targeted, ability of the market to pay,
supply - demand and a host of other direct and
indirect factors.
There can be several types of pricing

strategies, each tied in with an overall

business plan. Pricing can also be used a
demarcation, to differentiate and enhance
the image of a product.
WHY PRICING IS IMPORTANT?

Profit Margins
 The price you set affects your profit margin per
unit sold, with higher prices giving you a higher
profit per item if you don’t lose sales.

Sales Volumes
 One of the most obvious affects pricing will have
on your business is an increase or decrease in
sales volume. 
Position
The price you set sends a message to some consumers
about your business, product or service, creating a
perceived value. This affects your brand, image or
position in the marketplace.
Market Share
 The price you set makes you more or less competitive in
the marketplace, affecting your share of the market’s
volume. Some businesses lower prices temporarily to gain
market share from competitors, who can’t respond to and
meet a price decrease.
Loss Leaders
 Some businesses price products or services
at or below cost to get customers into their
businesses, who then spend more money
elsewhere.
FACTORS THAT AFFECT THE PRICE

Customers
 Three important factors are whether the buyers
perceive the product offers value, how many
buyers there are, and how sensitive they are to
changes in price.

Competitors
 How competitors price and sell their products
will have a tremendous effect on a firm’s pricing
decisions.
The Economy and Government Laws
and Regulations
 When the economy is weak and many people are
unemployed, companies often lower their prices. In
international markets, currency exchange rates also
affect pricing decisions.

 Pricing decisions are affected by federal and state

regulations. Regulations are designed to protect
consumers, promote competition, and encourage
ethical and fair behavior by businesses.
Product Costs
 The costs of the product—its inputs—including
the amount spent on product development,
testing, and packaging required have to be taken
into account when a pricing decision is made.
 PRICING STRATEGIES

STRATEGY MEANING EXAMPLE

-the use -Different customers
of automation to set may be shown different
prices dynamically prices based on their
based on factors such recent behavior or user
as customer behavior, profile.
Algorithmic customer profile or
Pricing supply. -The same customer
may also get different
-is common in highly prices based on actions
competitive industries such as visiting the
such as travel same page twice.
and ecommerce.
STRATEGY MEANING EXAMPLE

-a pricing strategy that

involves setting prices
-High-low pricing is
High-low high when a product is
first released and
extremely common in
pricing  decreasing the price later
retail, particularly fashion
retailing.
in a series of sales events
or item markdowns.
STRATEGY MEANING EXAMPLE
-similar strategy to high- -When it comes to new
low pricing whereby technology, early
innovative new products adopters are often
are released at a high enthusiasts who
price to quickly are willing to pay
Pricing recover product more for cutting edge
Skimming development costs. technology in a particular
area.
-Charging a high price for
a new product and
reducing the price with
time.
STRATEGY MEANING EXAMPLE
- the strategy of -A beverage company
improving market launches a brewed tea in
share with a low price. a bottle that is nothing
but green tea. It is
- It is associated with launched into a market
Penetration efforts to launch a new that is almost completely
company, brand, product, dominated by sweetened
pricing  service or technology. beverages and bottled
water.
STRATEGY MEANING EXAMPLE

-A leather goods company

enjoys high status as a
-the strategy of charging a
luxury brand. They sell at
Premium high price in order to
preserve the status of a
a reasonably high price
pricing   brand, business, product
point. Due to their status,
they could dramatically
or service. .
boost sales volumes by
discounting items.
STRATEGY MEANING EXAMPLE

-a pricing strategy that
-This is particular true for
sets prices lower than all
Price other competition. In
a commodity that
customers view as similar
leadership  many cases, the lowest
price attracts significant
in quality from one
producer to the next.
revenue.
STRATEGY MEANING EXAMPLE
- a pricing method aimed
at maximizing profit by
making micro-
adjustments in pricing
structure.
- the price of $17.99 looks
- It relies on the
Odd Pricing assumption that
more like $17 and not like
$18.
consumers are
calculation-averse and
will therefore only read
the first digits of a price
when making their
purchasing decision.
STRATEGY MEANING EXAMPLE

- intense price
competition between two
or more competitors in a
market.
- it can result in
Price War  - It is characterized by
competitors dropping
from a market.
retaliatory price cuts that
may escalate until prices
fall below costs for some
competitors.
STRATEGY MEANING EXAMPLE

- the seller lowers the variance on

this willingness to pay and
increases its profit by selling
bundles of products instead of - on Amazon, the price
selling all products separately. of the Xbox One alone
Bundle - Moreover, the seller makes
is $345, but when
bundled with Halo the
Pricing  bundles in order to fulfill a
specific need of its customers:
price rises by only two
dollars to become
the bundle fits a unit of need and $347.
therefore it becomes more
pertinent for the consumer to
purchase it.
 STRATEGY MEANING EXAMPLE

-a revenue model that
charges a recurring fee
for access to a product or - A telecom provider
service. charges customers a
Subscription - Its recurring nature is monthly fee for
Model  attractive to businesses
as a stream of income
broadband access with
unmetered bandwidth.
and as a means for
improving customer
lifetime value.
STRATEGY MEANING EXAMPLE

Decoy - well known tendency for - marketers may design

the presence of a bad a price list to include

Effect  choice in a list of options options that are obviously

to influence decisions. a bad deal.
STRATEGY MEANING EXAMPLE

- commonly
abbreviated EDLP
- This policy may be
Everyday - is a retail price
strategy that avoids sales
backed up with a promise
to match the offers of
Low Price and other markdowns in competitors on the same
favor of a commitment to items..
customers to always have
the lowest price.
STRATEGY MEANING EXAMPLE

-Pure commodities such

as materials and many
- a price determined by
agricultural products are
supply and demand.
typically sold at a market
Market - The effect of a market
price.

Price  price depends on the

degree to which a
-Strongly differentiated
products such as luxury
particular good or service
goods aren't as strongly
is commoditized
effected by market prices.
STRATEGY MEANING EXAMPLE
- a price strategy that
attempts to put
competitors out of
business by offering a low
- Government subsidies
price, often below cost.
or policies that give local
Predatory - Predatory pricing is
industry a cost advantage
pricing   often aimed at achieving
that wipes out the
competition in other
a monopoly. It is
countries
considered anti-
competitive behavior that
is illegal in many
countries.
 STRATEGY MEANING EXAMPLE

-is any pricing
-Placing coupons on
strategy that charges
your website or in
different customers
advertising is a time
different prices in the
tested way to
Price interests of improving
revenue.
implement multi-tiered
Discriminatory pricing. Price sensitive
customers are typically
- It is typically designed
more willing to find
to charge customers that
and use coupons.
are less price sensitive a
higher price.
STRATEGY MEANING EXAMPLE

- Many people may be

- prices that support a willing to pay Php 1000 a
Price points level of demand that month for streaming
  suddenly drops if you
charge any more.
music but demand may
fall dramatically after
$1500.
STRATEGY MEANING EXAMPLE

-the price set by a - niche competitors may

dominant competitor in a offer something special
market. that enables a higher
Price price but the umbrella
Umbrella  - Smaller competitors
generally need to set a
price acts as a sort of
price gravity on all
lower price to attract competitors in the
customers. market.
STRATEGY MEANING EXAMPLE

- Firms that have

inventory that expires at a
point in time such as a
Pricing -Goals that define what a
business plans to achieve
seat on an flight typically
objectives  with pricing strategy.
want to sell at a high
selling price but also
don't want to be left with
unsold inventory.
STRATEGY MEANING EXAMPLE

-a manufacturer of
sunglasses may set a low
- the use of data to set price for unpopular
fine-grained prices. colors. Customers who
Variable are price sensitive may be
- The use of data to set
pricing   prices at a low level of
tempted to buy a color
that is on sale. Customers
granularity. who aren't price sensitive
will buy the color they
prefer.
STRATEGY MEANING EXAMPLE
-Customers in a particular
country are accustomed to
-the strategy of basing paying Php1000 for a
prices on historical price month of unlimited
points that streaming music. . In this
customers expect. environment, a service that
Customary launches at Php2000 may
pricing  -Customers may strongly see few subscribers even if
resist a price above what they have premium
they expect and may be features. A service that
attracted to prices below launches for $899 may
expectations attract business with little
effort.
 STRATEGY MEANING EXAMPLE

- price that is offered to all

customers without
-An ecommerce site sets
exception.
static prices for all
customers such as
- It tends to be popular
Php500 for a particular
with customers and can
pair of shoes.
Flat pricing  dramatically improve the
sales of a product or
They use themes of fair
and predictable pricing in
service.
their advertising,
promotion and brand
- Flat pricing is also
identity
simple to advertise,
administer and bill
STRATEGY MEANING EXAMPLE

-is a pricing model that

allows customers to pay
for usage of a service as
opposed to a recurring - A pay-as-you-go mobile
Pay-as- service fee. device allows customers
to pay for network access
you-go  -This may appeal to
customers who are
on an hourly, daily or
usage basis.
infrequent or temporary
users of a service.
STRATEGY MEANING EXAMPLE

-Price set in accordance

Value with customer

perceptions about the - Status products/

Pricing value of the

product/service.
exclusive products
STRATEGY MEANING EXAMPLE

-Goods/services
deliberately sold below
cost to encourage sales
Loss elsewhere. - Free Mobile Phone
when taking on contract
Leader -Purchases of other items
more than covers loss on
package.

item sold.
 STRATEGY MEANING EXAMPLE

-Used to play on
consumer perceptions.
-a buyer may assume that
Psychological -Links with value pricing
– high value goods priced
a suit priced at $500 is of
Pricing  according to what
higher quality than one
priced at $300.
customers think should
be the price.
STRATEGY MEANING EXAMPLE

-Many contacts awarded

on a tender basis.
Tender -Purchaser then chooses - Mostly done in secret.
Pricing which represents best
value
STRATEGY MEANING EXAMPLE

Absorption - Price set to absorb some

Cost Pricing of the fixed costs of
production
STRATEGY MEANING EXAMPLE

Full Cost - Attempting to set price

Pricing to cover both fixed and
variable costs.
 STRATEGY MEANING EXAMPLE

-The cost of producing

one extra or one fewer
Marginal Cost item of production.
- Relevant in transport
where fixed costs may be
Pricing -Allows flexibility
relatively high.
STRATEGY MEANING EXAMPLE

-Prices set to ensure

Contribution coverage of variable costs
and a contribution to the
- Contribution = Selling
Price – Variable (Direct
Pricing fixed costs. Costs)
 STRATEGY MEANING EXAMPLE

-Setting price to target a

specified profit level

-Estimates of the cost and

potential revenue at - Mark-up= Profit/Cost x
Target Pricing different prices, and thus 100
the break-even have to be
made, to determine the
mark-up.
STRATEGY MEANING EXAMPLE
- A firm has fixed costs of
$900 and a variable cost
- consists of setting the of $1 per unit. They
price based on the estimate that they will sell
production 100 units. Their total cost
Cost-Plus cost and the desired
level of mark-up. This
is 900+100 = $1000
meaning a price of $10
Pricing method allows a company per unit. They want to fix
to secure margin and is their mark-up at 30%.
easy to compute on a Therefore, the price will
large amount of products. equal to 1.3 x 10 = $13
and the profit will be 3 x
100 = $300.
STRATEGY MEANING

-Pay what you want is a pricing system where

buyers pay any desired amount for a given
commodity, sometimes including zero. In some
Pay what you cases, a minimum (floor) price may be set, and/or a
want suggested price may be indicated as guidance for
the buyer. The buyer can also select an amount
higher than the standard price for the commodity.
 STRATEGY MEANING

-Price discrimination is the practice of setting a

different price for the same product in different
segments to the market. For example, this can be
Price for different classes, such as ages, or for different
discrimination opening times. Price discrimination may improve
consumer surplus. When a firm price
discriminates, it will sell up to the point where
marginal cost meets the demand curve.
STRATEGY MEANING

-A flexible pricing mechanism made possible by

advances in information technology, and
employed mostly by Internet-based companies.
By responding to market fluctuations or large
Time-based amounts of data gathered from customers –
pricing ranging from where they live to what they buy to
how much they have spent on past purchases
– dynamic pricing allows online companies to
adjust the prices of identical goods to correspond
to a customer's willingness to pay.
STRATEGY MEANING
-Pricing a product based on the value the product
has for the customer and not on its costs of
production or any other factor. This pricing
strategy is frequently used where the value to the
customer is many times the cost of producing the
item or service. For instance, the cost of
Value-based producing a software CD is about the same
pricing independent of the software on it, but the prices
vary with the perceived value the customers are
expected to have. The perceived value will depend
on the alternatives open to the customer. In
business these alternatives are using competitors
software, using a manual work around, or not
doing an activity.
STRATEGY MEANING
-Pricing a product based on the value the product
has for the customer and not on its costs of
production or any other factor. This pricing
strategy is frequently used where the value to the
customer is many times the cost of producing the
item or service. For instance, the cost of
Value-based producing a software CD is about the same
pricing independent of the software on it, but the prices
vary with the perceived value the customers are
expected to have. The perceived value will depend
on the alternatives open to the customer. In
business these alternatives are using competitors
software, using a manual work around, or not
doing an activity.
STRATEGY MEANING

-This type of pricing focuses on keeping the price

at the same level for all four periods of
the product life cycle. However, with this type of
strategy, there is no opportunity to make higher
Neutral profits and at the same time it doesn’t allow for
strategy increasing the market share. Also, when the
product declines in turnover, keeping the same
price effects the margins thereby causing an early
demise. This pricing is used very rarely. (Intro –
Growth – Maturity – Decline)
 STRATEGY MEANING

Cost leadership, which involves keeping costs as

Cost low as possible and undercutting competitors.
The other is to differentiate your product, which
Leadership or allows you to sell it for top dollar. Within the
Differentiation electronics arena, Dell is a cost leader for laptops,
while Apple is a differentiator.
STRATEGY MEANING

An intense price competition between two or

more competitors in a market. It is characterized
Price War by retaliatory price cuts that may escalate until
prices fall below costs for some competitors.
STRATEGY MEANING

A revenue model that charges a recurring fee for

Subscription access to a product or service. Its recurring nature
is attractive to businesses as a stream of income
Model and as a means for improving customer lifetime
value.
STRATEGY MEANING

A revenue model that charges a recurring fee for

Subscription access to a product or service. Its recurring nature
is attractive to businesses as a stream of income
Model and as a means for improving customer lifetime
value.