PRINCIPLES OF MARKETING

4 PS: PRICE
QUARTER 4 WEEK 2
At the end of the lesson, the learners are
expected to:
Identify and describe the factors to
consider when setting prices and new
product pricing and its general pricing
approaches.
THINK ALOUD

What is Price?
PRICE
It is the amount of money charged
for a good or service.
It is the sum of the values consumers
exchange for the benefits of having or
using the product or service.
What are the factors to consider
when setting prices for products?
FACTORS AFFECTING PRICE DECISIONS
Internal factors: Pricing Decisions External factors:
-Marketing Objectives -Nature of the market
-Marketing-mix and demand
strategy -Competition
-Costs -Other environmental
-Organization for factors(economy,
Pricing resellers, government)
INTERNAL FACTORS AFFECTING PRICE
DECISIONS
1. Marketing Objectives
A. Survival
B. Current Profit Maximization
C. Market Share Leadership
D. Product-Quality Leadership
E. Other Objectives
MARKETING OBJECTIVES
1 Survival
-Companies troubled by too much capacity, heavy
compensation, or changing consumer wants set
survival as their objective.
-Hotels often use this strategy when the economy
slumps.
MARKETING OBJECTIVES
2. Profit Maximization
-Many companies want to set a price that will
maximize current profit.
-Most businesses take two paths to maximize
profit-they either raise prices to increase their top-
line revenue or reduce cost to increase bottom-line
profit.
MARKETING OBJECTIVES
3. Market-Share Leadership
A market share is a company with the largest share
in an industry that can use its dominance to affect
the competitive landscape and direction the market
takes. It typically enjoys the largest percentage of
total sales in a given market.
MARKET LEADER

The company with the largest market share in the

industry.
MARKETING OBJECTIVES
4. Product-Quality Leadership
Is where a company aims to provide
the best quality product in the market,
and therefore charges more than its
competitors.
INTERNAL FACTORS AFFECTING PRICING
DECISIONS

2. Marketing Mix Strategy

Price must be coordinated with product
design, distribution, and promotion
decisions to form a consistent and
effective marketing program.
INTERNAL FACTORS AFFECTING PRICING
DECISIONS
3. Costs
A company wants to charge a price that
covers its cost for producing, distributing, and
promoting the product.
The price has to be high enough to deliver a
fair rate or return to investors.
INTERNAL FACTORS AFFECTING PRICING
DECISIONS
4. Organizational Considerations
In small companies, top management usually
sets the prices. In large companies, pricing is
typically handled by a corporate department or
regional or unit managers, under guidelines
established by corporate management.
EXTERNAL FACTORS AFFECTING PRICING
DECISIONS
1. Market and Demand
-Before setting prices, a marketer must understand
the relationship between price and demand for a
product.
Law of demand and supply generally states that, as
price increases, people are willing to supply more
and demand less and vice versa when price falls.
EXTERNAL FACTORS AFFECTING PRICING
DECISIONS

2. Competition
-Setting the prices of products in
relation to the prices of your
competitors.
EXTERNAL FACTORS AFFECTING PRICING
DECISIONS
3. Other Environmental Factors
-Economics Factors economic status,
recession, inflation, and interest rates
-Environmental Factors microenvironmental
(SWOT Analysis) and macroenvironment
(PESTEL Analysis) factors
EXTERNAL FACTORS AFFECTING PRICING
DECISIONS
3. Other Environmental Factors
-Governmental Regulations:
Factors to consider:
-Labor laws -Licenses
-Taxes -Privacy
-Employment -Technology
GENERAL PRICING APPROACHES
1. Cost-Based Pricing
-The simplest pricing methods is cost-plus pricing, adding
standard markup to the cost of the product.
E.g. cost-Php 100.00
Mark up-20%
Php 100.00x.20=Php20 mark up
Php 100.000+Php20= Php120.00-selling price
GENERAL PRICING APPROACHES
2. Break-Even Pricing
-Is the amount of money, or change in value, for
which an asset must be sold to cover the costs of
acquiring and owning it.
-It can also refer to the amount of money for which
a product or service must be sold to cover the costs
of manufacturing or providing it.
GENERAL PRICING APPROACHES
2. Break-Even Pricing
Example:
Widget Cost Direct labor Php 5
Materials Php 2
Manufacture Php 3
-Hence, the break-even price to recover costs for the
company is Php10 per widget.
GENERAL PRICING APPROACHES
3. Value-Based Pricing
-Uses the buyer’s perceptions of value, instead of
on the exact cost of developing the product, as the
key to pricing.
E.g. Starbucks, Apple, Louis Vuitton and resto
food
GENERAL PRICING APPROACHES
4. Competition-Based Pricing
-It is a pricing method that makes use of competitors’ prices for
the same or similar product as basis in setting the price.
3 Options:
A. Go above the price of your competition
B. Follow competitors’ prices
C. Go below the price of your competitors
PRICING STRATEGIES
1. New Product Pricing Strategies
2. Existing Product Pricing Strategies
3. Psychological Pricing
NEW PRODUCT PRICING STRATEGIES
1. Prestige Pricing
-Prices are consciously kept higher
than normal, thinking that buyers will
associate a high price for the product
with superior quality.
NEW PRODUCT PRICING STRATEGIES
2. Market-Skimming Pricing
-Producer sets a high introductory price to
attract buyers with a strong desire for the
product and the resources to buy it, and then
gradually reduces the price to attract the next
and subsequent of the market.
NEW PRODUCT PRICING STRATEGIES
3. Market-Penetration Pricing
-Companies set a low initial price to
penetrate the market quickly and
deeply, attracting many buyers and
winning a large market share.
EXISTING PRODUCT PRICING STRATEGIES
1. Product Bundle Pricing
-Companies package separate
products together and offer them
at a single-typically reduced-
price.
EXISTING PRODUCT PRICING STRATEGIES
2. Price Adjustment Strategies
A. Volume Discounts
E.g. Wholesaler’s price
B. Discounts based on time of purchase
E.g. End-of-Season Sale
C. Discriminatory pricing
E.g. Women’ sale during Women’s Month
PSYCHOLOGICAL PRICING
1. Promotional Pricing
-Temporary pricing products below list
price and sometimes even below cost.
Example: Buy one, take one!
 30% off on all items!
PSYCHOLOGICAL PRICING
2. Odd Pricing
-It is the practice of setting retail prices
that end in the digits 5 or 9 such as PHP
49.95. PHP 99, PHP 29.75
 ???

Test your
knowledge!
 ANSWERS QUESTION #1
It refers to the amount expected required or given
payment for something.
A. interest
B. Profit
C. Price
D. Revenue
 ANSWERS QUESTION #2
It is a general pricing approach that uses the buyer’s
perception of value. Instead of on the exact cost of
developing the product, as the key to pricing.
A. Break-even pricing
B. Cost-based pricing
C. Competition-based pricing
D. Value-based pricing
 ANSWERS QUESTION #3
A new model of mobile phone was launched with an
SRP of PHP25,000. After three months, its price dropped
to PHP20,000. What pricing strategy was used?
A. Prestige pricing
B. Market-skimming
C. Market-penetrating pricing
D. Promotional pricing
 ANSWERS QUESTION #4
A company decided to price its set of products including
a fabric conditioner, liquid detergent, and bleach in one
pack with an SRP PHP 300. This is an example of:
A. Product bundle pricing
B. Odd pricing
C. Value pricing
D. Promotional pricing
 ANSWERS QUESTION #5
All are possible options for competition-based pricing
EXCEPT:
A. Follow competitor’s prices
B. Go below the price of your competitors
C. Go above the price of your cpmpetitors
D. All are possible options for competition-based pricing
 CORRECT ANSWERS:
1. C
2. D
3. B
4. A
5. D