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Learning Objectives
1. Outline the internal factors affecting pricing decisions,
especially marketing objectives, marketing mix
strategy, costs, and organizational considerations.
2. Identify and define the external factors affecting
pricing decisions, including the effects of the market
and demand, competition, and other environmental
elements.
3. Contrast the differences in general pricing
approaches, and be able to distinguish among costplus, target profit pricing, value-based pricing, and
going rate.
Price
Simply defined:
Price is the amount of money charged for a
product or service
Broadly defined:
Price is the sum of values consumers
exchange for the benefits of having or using
the product or service
Is Too CostOriented
Does Not
Account for
the Marketing
Mix
Mistakes
Include
Pricing That:
Fails to
Reflect
Market
Changes
Is Not Varied
Enough
Internal
Factors
Factors
that
Affect
Pricing
Decisions
External
Factors
C rg
onM an
O siadrk iza
bj e e t i
ec ratin on
tiv tiog al
es ns
Internal Factors
Internal Factors
Marketing Objectives
Survival
Survival
ProductQuality
Quality
Leadership
Leadership
Current
Profit
Maximization
Maximization
Market-Share
Leadership
Leadership
Other
Other
Objectives
Objectives
External Factors
The Nature of
Market & Demand
Consumer
Competition
Perceptions
of Price &
Value
Price-Demand Relationship
The Product
is Unique
Buyers are
Less Price
Sensitive
When:
The Product is
High in
Quality,
Prestige or
Exclusiveness
Substitute
Products are
Hard to Find
End-Benefit
Effect
Substitute
Awareness
Effect
Total
Expenditure
Effect
Business
Expenditure
Effect
Price
Quality
Effect
Approaches to Pricing
Cost-Base
Pricing
ValueBased
Pricing
BreakEven
Pricing
CompetitionBased Pricing
MarketPenetration
Pricing
MarketSkimming
Pricing
ProductBundle
Pricing
Existing
Product
Pricing
Strategies
PriceAdjustment
Strategies
Price-Adjustment Strategies
Discount
Discount
Pricing
Pricing and
and
Allowances
Allowances
Discriminatory
Discriminatory
Pricing
Pricing
Revenue
Revenue
Management
Management
Psychological Pricing
Promotional
Pricing
Psychologic
al Pricing
Value
Pricing
Price Changes
Initiating
Price
Changes
Price Cuts
Price
Increases
Key Terms
Cost-plus pricing Adding a