Pricing Products: Understanding and Capturing

Customer Value

1 © 2012 Principles of Marketing: An Asian Perspective

10
 Week 10 Pricing Strategies

10.1 What is Price?

10.2 Factors Affecting Pricing Decisions
10.3 Pricing Strategies:
a. Price Setting
b. New-Product (Market Entry)
c. Product Mix
d. Price Adjustment
10.4 Initiate Price Changes

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 10.1 What is a Price?

Pricing and value

• The amount of money charged for a product or service.

• The amount paid by customer in exchange of goods/services received

 
• More broadly, The sum of all the values that customers give up in
order to gain the benefits of having or using a product or service.

• The only element in the marketing mix (4Ps) that produces revenue.

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 10.2 Factors Affecting Pricing Decisions

Considerations in Setting Price

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 10.3 Pricing Strategies

Value-based pricing versus cost-based pricing

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 10.3 Pricing Strategies

Customer value-based pricing

•Uses buyers’ perceptions of value, not

sellers’ cost, as the key to pricing.

•Price
is considered along with the other
marketing mix variables before the
marketing program is set.

•The company first assesses customer needs and value perceptions,

then sets its target price based on customer perceptions of value.

•Twotypes of value-based pricing are good-value pricing and value-

added pricing.

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 10.3 Pricing Strategies

Cost-based pricing

•Cost-based pricing is product-driven.

•Price setting is based on the costs for producing, distributing, and

selling the product plus a fair rate of return for its effort and risk.

•The company designs what it considers to be a good product, adds up

the costs of making the product, and sets a price that covers costs
plus a target profit.

•Marketing then convinces buyers that the product’s value at that price
justifies its purchase.

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 10.3 Pricing Strategies

Types of Costs

FIXED COSTS
+
VARIABLE COSTS

=
TOTAL COSTS

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 10.3 Pricing Strategies

Competition-based pricing

•Price setting based on competitors’ strategies, costs, prices, and market

offerings.

•Consumers will base their judgments of a product’s value on the prices that
competitors charge for similar products.

•No matter what price you charge relative to the competition—high, low, or
in-between—be certain to give customers superior value for that price.

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 10.3 Pricing Strategies

New product pricing strategies

10 © 2012 Principles of Marketing: An Asian Perspective

 10.3 Pricing Strategies

Product mix pricing strategies

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 10.3 Pricing Strategies

Price-adjustment strategies

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 10.4 Initiate Price Changes

Initiating and reacting to price cuts and price increases

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Thank
you