Pricing and value

10
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What is price?
the sum of all the values that consumers give
up in order to gain the benefits of having or
using a product or service.

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 CUSTOMER MARKETING
PERCEPTIONS OF STRATEGY,
VALUE OBJECTIVES, MIX

Setting
Prices

MARKET AND PRODUCT

COMPETITION COSTS

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Considerations in Setting
Price
 Setting Prices
VALUE-BASED COST-BASED
Assess needs and value
Design a product
perceptions

Set target price Determine costs

Determine costs Set price based on cost

Design a product Convince buyers of the value

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Value-based
pricing
uses buyers’
perceptions of value,
not sellers’ cost, as
the key to pricing.

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Value-based pricing
GOOD VALUE VALUE ADDED

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 Good Value
perceptions

EDLP

HIGH-LOW

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Cost-based
pricing

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 Types of
costs
FIXED COSTS
+
VARIABLE COSTS
=
TOTAL COSTS

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Costs at Different Levels of
Production
 Costs as a Function of Production Experience

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 Cost + Pricing
MARKUP

PRICE
PRODUCT COST

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Cost – Plus Pricing
Example
Break-even pricing

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Break-even pricing

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Competition – based
pricing
 Other pricing considerations

MARKETING STRATEGY AND

OBJECTIVES

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 Other pricing considerations

ORGANIZATIONAL FACTORS

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 Other pricing considerations

TARGET COSTING

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 Other pricing considerations

TYPES OF MARKETS

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PURE COMPETITION OLIGOPOLY
MONOPOLISTIC COMPETITION MONOPOLY

Market types
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 Other pricing considerations

PRICE AND DEMAND

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 Elasticity of demand

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 Elasticity of demand

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Elastic

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Inelastic

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 Other pricing considerations

COMPETITORS

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Competitors’
strategies

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 Other pricing considerations

ECONOMIC CONDITIONS

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 Other pricing considerations

OTHER EXTERNAL FACTORS

- Resellers
- Government
- Social concerns

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