MARK1012 LECTURE 8: PRICING: MOHAMMED

LectureObjectives

MARK 1012

1. Definepricingandunderstandfactorsinfluencingpricingdecisions
andthreemainpricingstrategies.
2. Discusstheimportanceofunderstandingcustomervalue
perceptions,costs,andcompetitorstrategieswhensettingprices.
3. Identifyanddefinetheotherimportantinternalandexternal
factorsaffectingafirmspricingdecisions.
4. Describethemainstrategiesforpricingnewandimitative
products.
5. Explainhowcompaniesfindasetofpricesthatmaximisethe
profitsfromthetotalproductmix.
6. Discusshowcompaniesadjusttheirpricestotakeintoaccount
differenttypesofcustomersandsituations.
7. Discussthekeyissuesrelatedtoinitiatingandrespondingtoprice
changes.

MOHAMMED A RAZZAQUE

Mohammed A Razzaque . School of Marketing .

University of New South Wales

FactorsinfluencingPricingDecisionsandPricingStrategies

WhatisPrice?
Predetermined Receivable In Commercial Exchanges
Priceisthe

Factors

Companies

amountofmoneychargedfor
aproductorservice;
sumofthevaluesconsumers
exchangeforthebenefitsof
havingorusingtheproductor
service;and
onlyelementofthemarketing
mixthatproducesrevenue;
allotherelements
representcosts.

Companysmarketing
objectives,
Companysmarketingmix
strategy,costsand
organisation.
thenatureofthemarketand
demand,
competitionandother
environmentalfactorsthat
influencepricingdecision).

Customervaluebased
pricing,
Costbasedpricingand
Competitionbasedpricing.

Mohammed A Razzaque . School of Marketing .

University of New South Wales

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FactorsAffectingPrice

FACTORSAFFECTINGPRICE

MarketingObjectives. Theoverallobjectives
influenceprice:
Internal Factors

CUSTOMER
PERCEPTIONSOFVALUE
Pricing
Decisions

Government
External Factors

PRODUCTCOST
Mohammed A Razzaque . School of Marketing .
University of New South Wales

Threemainpricing
strategies:

External

Revenue[orturnover]isincomethat
acompanyreceivesfromthesale of
itsofferingstocustomers.

MARKETING STRATEGY
MARKETING OBJECTIVES
MARKETING MIX
NATURE OF THE MARKET
NATURE OF DEMAND

Strategies

Internal

donotusuallysetasingle
price,theyadoptapricing
structure thatcoversdifferent
itemsinitsproductline.
adjustproductpricestoreflect
changingcostsanddemand
andtoaccountforvariations
inbuyersandsituations.

Mohammed A Razzaque . School of Marketing

University of New South Wales

Competitorsactions

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Survival:

primaryfactorinmarginalbusinesses;
stayinginbusinessinhopesofmakingprofits
whenconditionsimprove.
CurrentProfitMaximisation:
emphasisingshorttermresultsoverlongrun
performance.
MarketShareLeadership:
companyseeksthedominantmarketshare;
Lowpricesincreasedemandsothatlater
volumecreatesprofit.
ProductQualityLeadership:
tendstopushpriceshigh;
maybelinkedtoniching strategy.

Mohammed A Razzaque . School of Marketing .

University of New South Wales

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MARK1012 LECTURE 8: PRICING: MOHAMMED

Internal Factors Affecting Price

MarketingMixStrategy.
Pricemustsupport theoverall
marketingmixandthepositioning
strategy.
Priceconveystoconsumeronekind
ofinformation abouttheproduct.

Costs.
Setthepricingfloorthatthe
companycancharge foritsproduct.

Themarketand
demandsetsthe
upperlimit
Competitorsprice
andotheroffers
Otherexternal
factors

HowtheOrganisationdelegatesthe
pricingfunctionaffectsprice.
Pricingisalsolinkedtooverall
companygoals.
From Previous page

Goodvaluepricing

Valueaddedpricing

Offeringjusttherightcombinationof
qualityandgoodservicethat
customerswantatafairprice.

Companiesadoptvalue
addedpricingstrategiesto
increasepricingpower.
NOTcuttingpricesto
matchcompetitors;rather
addingvalueadded
featuresandservicesto
differentiatetheir
offeringsandthis
supportshigherprices.

Mohammed A Razzaque . School of Marketing .

University of New South Wales

Thesimplestmethod,involvesaddinga
standardmarkuptothecostofthe
product.
Priceisbasedoncostsandthedesired
profitmargin butignoresmarketdemand
factors.
Nostandardmarkupstosetprices.
Highestmarkup hasthehighestrisk.
Markupsaresmallestonsome
commoditiessuchasmilkandbread;
higheronseasonalitemsandperishable
goods.
Markupsvarywidelyacrossdifferent
industries.
Mohammed A Razzaque . School of Marketing .
University of New South Wales

Costplus
pricing
Costbased
Pricing

Breakeven
pricing

Competition
basedPricing

Targetreturn
Pricing

Costs setthefloor for

thecompanysprice.
Thepricemust;
coverallcostsfor
producing,distributing,
deliveringandsellingthe
product;and
deliverafairrateofreturn
foritseffortandrisk.

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Itisarguedthatmany
companiespursuethe
followingcycle:
LowPrice

Increase
insales

Decreases
thecost

Lowcostandlowpricecan
generategreatsalesand
profitandrevenue.

Increasein
levelof
production

Mohammed A Razzaque . School of Marketing .

University of New South Wales

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Cost-Plus Pricing [Cost + Mark-Up]

TypesofCostbasedpricing
Costpluspricing

ValueAdded
Pricing

Costbasedpricing

PriceisbasedonbuyersperceptionsofvalueNOTthesellerscost.
Analyseconsumerneedsandvalueperceptionsandthendetermine
thepricetomatchconsumersperceivedvalue.

introducinglessexpensiveversions
ofestablishedname,or
redesigningexistingbrandstooffer
morequalityforagivenprice,orthe
samequalityforless,and
EDLPoreverydaylowpricing(EDLP)
intheretailsectorisanexample.

Goodvalue
Pricing

Mohammed A Razzaque . School of Marketing .

University of New South Wales

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Customervaluebasedpricinganditstwotypes

Involves:

CustomerValue
BasedPricing

Majorpricing
strategies

Economicconditions
Government
Tradepractices

OrganisationforPricing.

Mohammed A Razzaque . School of Marketing

. University of New South Wales

Different
organisations
may use different
pricing strategies

External Factors

Reasonsforcostpluspricingpopularityare:

Breakevenpricingand
targetreturnpricing

Sellersare
morecertain
oftheircosts
thantheyare
Increased
about
Certainty
demand.

Involves setting the

price to break even on
the costs of making
and marketing a
product, or to make the
desired profit.

Key
Reasons for
Cost-Plus
Popularity

Based on the concept

of a breakeven chart,
which shows the
total cost and total
revenue expected at
different sales
volume levels.

Perceived
Fairness

Mohammed A Razzaque . School of Marketing .

University of New South Wales

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Asallfirmsintheindustryuse
thismethod,pricestendtobe
similarandpricecompetitionis
minimised.
Minimise
Price
Competition

Ensuresaprofitforsellersfor
theirvalueaddedactivitiesand
doesnottakeadvantageof
consumerswhendemandis
greater.

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MARK1012 LECTURE 8: PRICING: MOHAMMED

Breakeven pricing and targetreturn pricing

TypesofCosts
Costs setthepricingfloorthatthecompanycanchargefor
itsproduct.Therearetwotypesofcosts:

Breakeven Analysis.
An analysis of the company's costs in relation to
units of the product produced and sold.

FixedCosts (oroverhead)arecoststhatdonotvarywith
productionorsaleslevels.

Identifies the minimum pricing level the company's

activities can support.

VariableCosts varydirectlywiththelevelofproduction.

TotalCosts thesumofthefixedandvariablecostsfor
anygivenlevelofproduction varywithlevelof
production.

Target Profit Pricing.

A variation on break-even analysis that links price
to profit objectives above total costs.

Pricemustcoverthetotalcost.Highercostwillleadtoahigher
priceandlessprofit,whichresultsinacompetitivedisadvantage.

Computationally appealing; however, its use in planning

should accommodate the fact that increased prices
decrease demand.

Mohammed A Razzaque . School of

Marketing . University of New South Wales

Managementmustconsiderhowcostswillchangeatdifferent
levelsofproductionaspartoftheiroveralldemandmanagement
strategy.
Mohammed A Razzaque . School of Marketing .
University of New South Wales

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COSTPLUSPRICING:COMPUTATION

BreakevenAnalysisI

ForProductX,perunitvariablecostis$47,fixedcostsis

Break-even analysis identifies the so-called break-even point, i.e., the

volume at which total costs (fixed and variable) and total revenue are
equal. At Break-even volume [unit terms or dollar terms]
total profit is zero: the organization neither makes a profit nor incurs a loss.

Cost in Dollars
(thousands)

$500,000andexpectedunitsalesvolumeis20,000units.Ifthe
manufacturerintendstoearna20%markuponsales,what
willbethemanufacturersmarkupprice?
ManufacturerscostsperunitofX=unitcost+fixedcosts/unitsales
=$47+500,000/20,000=$72
Letthemarkuppricebe
Then (1 desiredreturnonsales)=$72
=$72/(1 .2)=$90.00
WhatistheMarginalRevenue[MR]here?$90.00

Total Revenue

1,200
1,000
800
600
400
200

MRistheadditionalrevenuethataproducerreceivesfromsellingonemoreunit
ofthegood.

Unless otherwise stated, mark-up is always calculated on sales; NOT on costs.

Target Profit ($200,000)

Total Cost
Fixed Cost
10

20

30

40

50

Sales Volume in Units (thousands)

In the above example, calculating the markup price as

$72 x (1 +.2) = $86.4 would be incorrect.
Mohammed A Razzaque . School of Marketing .
University of New South Wales

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Mohammed A Razzaque . School of Marketing .

University of New South Wales

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IllustrativeExampleI

BreakevenAnalysisII

ConsiderthefollowingdataforPositronInc:(1)directlaboris$8.50perunit,
(2)rawmaterialsare$3perunit,(3)sellingpriceis$24perunits,(4)
advertisingandsalesforcecostsare$380,000,and(5)otherrelevantfixed
costsare$120,000.

Inequationformafirm'sprofit(orloss)maybeexpressedas:
Profit=Totalrevenue [totalvariablecosts+totalfixedcosts]
Sinceprofit(orloss)iszeroatthebreakevenpoint,theaboveequation
mayberewrittenas:
Totalrevenue =Totalvariablecosts+Totalfixedcosts

Contributionperunit

=Sellingprice Variablecosts
=$24.00 ($8.50+$3.00)=$12.50

Breakevenpointinunits =__Totalfixedcosts__
Contributionperunit
=[$380,000+$120,000]/$12.50
=40,000units

Theformulafordeterminingthenumberofunitsrequiredtobreakeven
isasfollows:
1. Breakevenpoint[BEP]inunits =TotalFixedCost
Contributionmargin
2. Breakevenpoint[BEP]indollars =Totalfixedcost

Breakevenpointindollars

=_$500,000__
1 $11.50/24.00
=_$500,000_
=$960,000
1 0.479167
AlternativelyBreakevenpointindollars=40,000X$24.00perunit
=$960,000

Variablecostperunit

1--sellingpriceperunit
= BreakevenpointinunitsxSellingpriceperunit
Mohammed A Razzaque . School of Marketing .
University of New South Wales

Mohammed A Razzaque . School of Marketing .

University of New South Wales

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MARK1012 LECTURE 8: PRICING: MOHAMMED

IllustrativeExampleII
BEPWithprofitTarget

Valuebasedpricingvs CostBasedPricing

SupposeSingtronwantstoachieveaprofitgoalof$100,000.
Howmanyunitsshouldtheysell?
Breakevenpointinunits=__Totalfixedcosts_+Targetprofit_
Contributionperunit
=[$380,000+$120,000+$100,000]/$12.50
=48,000units
Breakevenpointindollars=_$600,000__
1 $11.50/24.00
=_$600,000_
=$1152,000
1 0.479167
AlternativelyBreakevenpointindollars=40,000X$24.00perunit
=$1152,000

Mohammed A Razzaque . School of Marketing .

University of New South Wales

Mohammed A Razzaque . School of Marketing .

University of New South Wales

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ValueBasedPricing
Cost Based
Product

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CompetitionbasedpricingI

Value Based
START

Customer

Cost

Value

Price

Price

Value

Cost

Customers

Product

Reverseofcostbasedapproach,
usesthebuyer'sperceptionof
valueasthekeytopricing,and
utilisesnonpricemixvariablesto
helpsetperceivedvalueinbuyer's
mind.
Themarketermusthaveanaccurate
viewofwhatbenefitsandfeatures
consumerwantandarewillingtopayfor
insettingaspecificvaluepricinggoal.

Involvessettingpricesbasedoncompetitors
strategies,costs,pricesandmarketofferings.
Whatprincipleshouldguidedecisionsaboutwhat
pricetochargerelativetothoseofcompetitors?
Theanswerissimpleinconceptbutdifficultinpractice.
Becertaintogivecustomerssuperiorvaluefortheprice.

Toyota used this approach on its lower end cars like the Tercel and the Corolla in the
early 1980s. Once the value price was determined and profit per car objectives set,
engineers and designers were challenged with the task of making the cost of
production support those goals.
Mohammed A Razzaque . School of Marketing .
University of New South Wales

Mohammed A Razzaque . School of Marketing .

University of New South Wales

L8-21

Themarketanddemand I

CompetitionBasedPricingII

Marketanddemandsettheupperlimitofprices. Pricingvariesin
differenttypesofmarkets

Economic value pricing

Costs

??
??
Bid / Tender
??

more applicable to industrial markets;

Monopolisticcompetition:

sort of a package pricing that may include purchase

price, installation costs, maintenance, disposal costs
etc.

Oligopolisticcompetition:

manybuyers andsellerstradingoverarangeofprices.
Productscanbedifferentiatedinquality,features,orstyles.
fewsellerseachsensitivetotheother'spricingandstrategies.
Barrierstoentryprohibitnewsellersfromenteringthemarket.

Going-Rate Pricing approach

bases price largely on what competitors charge for
their products.

Puremonopoly:
asingleseller,e.g.,government,orregulated/unregulatedmonopoly
Pricingmaybelinkedtootherthancostorprofitfactors,includingfearof
competitionenteringorregulation.

Popular in markets where demand elasticity is

difficult to measure.

Sealed-Bid Pricing approach

Contract

Purecompetition:

involves competition between sellers attempting to

under price each other while still covering costs.

Manybuyersandsellerstradinginauniformcommoditysothatnoone
agentaffectspricing.
Goingratepricingistherule.

Common in bidding for government contracts.

Mohammed A Razzaque . School of Marketing .
University of New South Wales

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Mohammed A Razzaque . School of Marketing .

University of New South Wales

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MARK1012 LECTURE 8: PRICING: MOHAMMED

ElasticityofDemand

Themarketanddemand II

Priceelasticityofdemand=Percentchangeinquantitydemanded
Percentchangeinprice

ConsumerPerceptionsofPriceandValue.
Buyersultimatelydecideprices.Marketersmustcombinetechnicalexpertisewith
creativejudgementandanawarenessofbuyersmotivations.

Pricedemandrelationshipvariesfromproducttoproduct
Ademandcurve showsthenumberofunitsthemarketwillbuyinagiventime
periodatvariousprices.
Thepriceelasticityofdemand illustrateshowresponsivedemandwillbetoa
changeinprice.Twoconceptsareimportanthere:

InelasticDemand. demandhardlychangeswithasmallchangeinprice,
ElasticDemand. smallchangeinpriceschangesdemandgreatly,

Ethicalissuesinvolvedinpricingproductscharacterisedby
inelasticdemandareoftencomplicatedandcontroversial.
DonotconfusethisconceptwithMarginalRevenueorMR
MarginalRevenue=ChangeinRevenue
ChangeinQuantity
Mohammed A Razzaque . School of Marketing .
University of New South Wales

Mohammed A Razzaque . School of Marketing .

University of New South Wales

L8-25

PricingaNew(andinovative)product

Moreonelasticity

Market skimming prices:

Otherthingsequal,ifafirmfindsthedemandforone
ofitsproductsisinelastic,itcanINCREASEitstotal
revenuesbyraisingitsprice.

setting a high initial price for a new product to

skim maximum revenue from the segments
willing to pay the high price;
the company makes fewer but more profitable
sales.

Withinelasticdemand,pricereductioncausesthequantity
soldtoincreasebuttotalrevenueactuallydecreases.So
withinelasticdemandwhileapriceincreasecausesthe
quantitysoldtodecrease,thetotalrevenueincreases.

Market penetration prices:

setting a low initial price for a new product to
attract a large number of buyers; and
obtain a large market share.

Themoresubstitutesaproducthas,themorelikelyit
istobepriceelastic.

Pricing an imitative new product:

Inmanysnackmachinestoday,thebuyerhasmorethan
twodozenchoicesmakingthedemandmoreelastic.
Mohammed A Razzaque . School of Marketing .
University of New South Wales

positioning problems encountered

Mohammed A Razzaque . School of Marketing .
University of New South Wales

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Promotion

High

Low

Rapidskimming
strategy

Slowskimming
strategy

The strategy for

setting a price on an
offer often has to be
changed when the
product or service is
part of a mix.
This section
introduces five
productmix and
servicemix pricing
situations

Price
Low

Rapidpenetration
strategy

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ProductmixpricingstrategiesI

FourNewProductPricingStrategies

High

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Slowpenetration
strategy

Product Line Pricing

Setting Price Steps Between Product Line Items

Captive-Product Pricing

Pricing Products That Must Be Used With The Main Product

Product-Bundle Pricing

Pricing Bundles Of Products Sold Together

Optional-Product Pricing

Pricing Optional Products Sold With The Main Product

By-Product Pricing

Pricing Low-Value By-Products To Get Rid of Them

Mohammed A Razzaque . School of Marketing

. University of New South Wales

Mohammed A Razzaque . School of Marketing .

University of New South Wales

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MARK1012 LECTURE 8: PRICING: MOHAMMED

ProductMixPricingStrategiesII

Product-Mix Pricing Strategies III

ProductLinePricing.

CaptiveProductPricing.

Companiesusuallydevelopproductlinesratherthansingle
products.(e.g.dressshirts,airconditioners,refrigerators).
Referstosettingpricestepsbetweeneachproductintheline
establishingasinglepriceforallproductsinaproductline,
suchashavingapriceof$75forthehighpricedline,$55for
themediumpricedline,and$35forthelowerpricedline.

Pricingproductsthatmustbeusedwithamainproduct.
Forexample,therazorispricedlowwhilehighmarkupsare
attachedtothepriceoftheblades.

ByProductPricing.
Wastefromproductionanddistributionmaybesoldasby
productsallowingproducerstolowerpricesandcostsontheir
mainproducts.

OptionalProductPricing.

Meatproducts,petroleum/chemicalproductsareexamples.

Allowscompaniestopresentalowbasepricecapableof
attractingcustomerswhilemaintainingthepossibilityof
generatinghighrevenuesbysellingcostlyaddonslater.
Carsaregoodexamples.
Mohammed A Razzaque . School of Marketing .
University of New South Wales

ProductBundlePricing.
combinesseveralproductsandoffersthematareducedprice
fromthecostofeachproductpurchasedseparately.
Seasonticketsandgroupratesareexamples.
Mohammed A Razzaque . School of Marketing .
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PriceAdjustmentStrategies II

PriceAdjustmentStrategies I

DiscountsandAllowances:Reductionfromtheusualprice

Companies typically adjust their prices to account for various

customer differences and changing situations:

Discounts

Allowances

Cashdiscount,apricereductionto
buyerswhopaytheirbillspromptly.

Quantity discount isapricereduction

tobuyerswhobuylargevolumes.

Functionaldiscount (ortrade
discount)isofferedbythesellerto
tradechannelmemberswho
performcertainfunctions.
Seasonaldiscount isaprice
reductiontobuyerswhobuy
merchandiseorservicesoutof
season.
Mohammed A Razzaque . School of Marketing .
University of New South Wales

Tradeinallowances areprice
reductionsgivenforturning
inanolditemwhenbuyinga
newone.
Promotionalallowances are
paymentsorpricereductions
torewarddealersfor
participatinginadvertising
andsalessupportprograms

Mohammed A Razzaque . School of Marketing .

University of New South Wales

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PriceAdjustmentStrategies III

PriceAdjustmentStrategies IV

SegmentedPricing referstopricingdifferencesnotbasedon
costsandtakesseveralforms:

Promotionaladjustmentsrefertotemporaryreductionsbelow
listandsometimesbelowcosts,usedtoattractcustomers:

Customersegmentpricing targetaspecificsegment,asinsenior
citizendiscounts.

Promotional

Locationpricingstemsfrompreferenceswheredifferentlocations
havedifferentperceivedvalues,e.g.,seating inatheatre.
Timepricingreferstopricebreaksgivenattimesoflowerdemand;
e.g.,peak/offpeakseasonpricing

PsychologicalPricing basedonthereferencepriceconsumers
carryintheirmindwhenconsideringsellersprices.
Mohammed A Razzaque . School of Marketing .
University of New South Wales

More
Price
Adjustment
Strategies

Geographical

Value

International

Productformpricingvariescostsonversionsofaproductbyfeatures
butnotproductioncosts.

Lossleaders.Productsofferedbelow
coststoattractattentiontoanentire
line.
Specialevent.Pricingusedduring
slowseasons.
Cashrebates orlowfinancing.
Offeringextrastobringin
customersonthebrinkandhelp
themdecidetofinallypurchase.
ValuePricing.Offeringtheright
combinationofqualityandgood
serviceatafairprice.

Mohammed A Razzaque . School of Marketing .

University of New South Wales

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MARK1012 LECTURE 8: PRICING: MOHAMMED

PriceAdjustmentStrategies V
Geographicalpricing
Involves
deciding
howtoprice
productsfor
customers
locatedin
different
partsofthe
countryor
world.

OtherTypesofPriceAdjustments

FOBorigin pricing: The goods are placed free on

board (hence, FOB) a carrier. The title and responsibility
pass to the customer, who pays the freight from the
factory to the destination.
Uniformdelivered pricing The opposite of FOB
pricing. Here, the company charges the same price plus
freight to all customers, regardless of their location.
Zone pricing : All customers in a given zone pay a single
total price; the more distant the zone, the higher the
price.
Basingpoint pricing: The seller selects a given city as a
basing point and charges all customers the freight cost
from that city to the customer location, regardless of the
city from which the goods are actually shipped.
Freightabsorption pricing: The seller absorbs all or
part of the actual freight charges in order to get the
desired business

Mohammed A Razzaque . School of Marketing .

University of New South Wales

DynamicPricing
Adjustingpricescontinuallytomeetthecharacteristics
andneedsofindividualcustomersandsituations.

InternationalPricing
Thepricethatacompanyshouldchargeinaspecific
countrydependsonmanyfactors,includingeconomic
conditions,competitivesituations,lawsandregulations.

Mohammed A Razzaque . School of Marketing .

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LossLeaderStrategy

Pricechangesmaybeinitiatedforseveralreasons

Offeringaproduct/serviceatapricethatis notprofitablefor
thesakeofofferinganotherproduct/serviceatagreater
profitortoattractnewcustomers.

Price Cuts: Stem from

overcapacity, falling
market share, or
attempts to dominate
the market through
lower costs.

Acommonpracticewhenabusinessfirstentersamarket;
Alossleaderintroducesnewcustomerstoaproduct/servicein
the hopeofbuildingacustomerbaseand securingrecurringrevenue.
Morethanjustaniftybusinesstrick itisasuccessfulstrategyif
executedproperly.

Buyer Reactions to Price

Changes: May be direct,
though not always.
Sometimes higher
prices support quality
improvements and
lower prices mean
company or product
problems.

Example:Razorblades. CompanieslikeGilletteessentiallygivetheirrazor
unitsawayforfree,knowingthatcustomerswillhavetobuytheir
replacementblades,whichiswherethecompanymakesallofitsprofit.
Example: Microsoft'sXboxvideogamesystem,whichwassoldataloss
of morethan $100perunittocreatemorepotentialto profit fromthesale
of highermarginvideogames.
Mohammed A Razzaque . School of Marketing .
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Price Increases:
Initiating
Price Cuts

Initiating
Price Increases

Issues in Price
Change Strategies

Buyer
Reactions

Competitor
Reactions

Whether the buyer perceptions are correct or wrong will not

immediately change their inclination to act on them.

Inflation, tendency to
speculate on
inflationary trends, and
over demand may
cause prices to rise.
Higher prices can also
increase profit margins.

Competitor Reactions
to Price Changes: Most
often react in industries
with a small number of
firms, uniform products
in the market, and buyers
are well informed. May
be similar price changes
or increased non price
competition.

Mohammed A Razzaque . School of Marketing .

University of New South Wales

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Public policy and pricing

[Practices that are prohibited by law]

Responding to price changes

Pricefixing:settingpricesbya selleraftertalkingtoitscompetitors
Predatorypricing:sellingbelowcostwiththeintentionof
punishingacompetitorordrivingcompetitorsoutofbusiness.
Requiring dealers
to charge a
specified
retail price.

Offering different
price terms to
customers at a given
level of trade.

Copyright 2012 Pearson Australia (a division of Pearson Australia Group Pty Ltd) 9781442531109/Kotler/POM/5e

Copyright 2012 Pearson Australia (a division of Pearson Australia Group Pty Ltd) 9781442531109/Kotler/POM/5e
Mohammed A Razzaque . School of Marketing . University of
New South Wales

Stating prices or price

savings that mislead
consumers or are not
actually available to
consumers

Mohammed A Razzaque . School of Marketing .

University of New South Wales

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MARK1012 LECTURE 8: PRICING: MOHAMMED

SettingPricingPolicy
1. Selecting the pricing objective

2. Determining demand

3. Estimating costs
4. Analyzing competitors
costs, prices, and offers
5. Selecting a pricing method
6. Selecting final price
Mohammed A Razzaque . School of Marketing .
University of New South Wales

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