Marketing Ch 1 Lecture Notes

What is Price?

Price… = the amount of money charged for a product or service, or the sum of the values that consumers exchange for the benefits of having or using the product or service

Setting the right price is difficult… a host of factors come into play… the “right” pricing strategy is one that delivers both value to the customer and profits to the company

Customer perceptions of value… you can see the price ceiling (i.e. no demand above this price)

Product costs… you can see the price floor (i.e. no profits below this price)

Other internal and external considerations… 1 Competitors’ strategies… 2 Marketing strategy, objectives and mix… 3 Nature of the market and demand… 4 other environmental factors… may also be considered when setting the price

Major pricing strategies

Customer value-based pricing… = setting price based on buyer’s perceptions of value… It is important to remember that “good value” is not the same as “low price”… Steps to set price… 1 Assess customer needs and value perceptions  2 Set target price to match customer perceived value  3 Determine costs that can be incurred  4 Design product to deliver desired value at target price… Two types of value-based pricing… 1 good-value pricing… 2 value-added pricing

Good-value pricing… = offering the right combination of quality and good service at a fair price… Two types of good-value pricing… 1 everyday low pricing… 2 high-low pricing

Everyday low pricing… = charging a constant, everyday low price with few price discounts… e.g. Walmart, Costco

High-low pricing… = charging higher prices on an everyday basis but running frequent promotions to lower prices temporarily on selected items… sales days, early-bird savings, bonus earnings

Value-added pricing… = Companies attach value-added features and services to differentiate their offers (i.e. make their product different from others) and thus support higher prices

Activities: Read Panera Bread Company: It’s Not about Low...