Ch 10 -1 Copyright 2011 Pearson Education

Principles of Marketing,
Arab World Edition
Philip Kotler, Gary Armstrong, Anwar Habib, Ahmed
Tolba
Presentation prepared by Annelie Moukaddem Baalbaki

CHAPTER TEN
Pricing

Lecturer: Insert your name here

Ch 10 -2 Copyright 2011 Pearson Education

 Chapter Learning Outcomes
Topic Outline

10.1 What Is a Price?

10.2 Customer Perceptions of Value
10.3 Company and Product Costs
10.4 Other Internal and External Considerations Affecting
Price Decisions
10.5 New Product Pricing strategies
10.6 Product Mix Pricing Strategies
10.7 Price-Adjustment Strategies
10.8 Price Changes

Ch 10 -3 Copyright 2011 Pearson Education

 What Is a Price?
Price

Price is the amount of money charged for a product or

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

Price is the only element in the marketing mix that

produces revenue; all other elements represent costs.

Ch 10 -4 Copyright 2011 Pearson Education

 Factors to Consider When Setting Prices

Ch 10 -5 Copyright 2011 Pearson Education

 Customer Perceptions of Value

Customer oriented prices involves understanding how

much value consumers place on the benefits they receive
from the product and setting a price that captures that value.

Ch 10 -6 Copyright 2011 Pearson Education

 Customer Perceptions of Value
Value Based Pricing

Value-based pricing uses the buyers perceptions of value,

not the sellers cost, as the key to pricing.

Value-based pricing is customer driven

Cost-based pricing is product driven

Ch 10 -7 Copyright 2011 Pearson Education

 Customer Perceptions of Value

Ch 10 -8 Copyright 2011 Pearson Education

 Customer Perceptions of Value
Value-Based Pricing

Good-value pricing offers the right combination of quality

and good service to fair price.

Existing brands are being redesigned to offer more quality for

a given price or the same quality for less price.

Ch 10 -9 Copyright 2011 Pearson Education

 Customer Perceptions of Value
Value-Based Pricing: Good-Value Pricing

Everyday low pricing (EDLP) involves charging a constant

everyday low price with few or no temporary price discounts.

High-low pricing involves charging higher prices on an

everyday basis but running frequent promotions to lower
prices temporarily on selected items.

Ch 10 - Copyright 2011 Pearson Education

10
 Customer Perceptions of Value
Value-Based Pricing: Value-Added Pricing

Value-added pricing attaches value-added features and

services to differentiate offers, support higher prices, and build
pricing power.

Pricing power is the ability to escape price competition and to

justify higher prices and margins without losing market share.

Ch 10 - Copyright 2011 Pearson Education

11
 Company and Product Costs
Cost-Based Pricing

Cost-based pricing involves setting prices based on the costs

for producing, distributing, and selling the product plus a fair
rate of return for its effort and risk.

Cost-based pricing adds a standard markup to the cost of

the product.

Ch 10 -12 Copyright 2011 Pearson Education

 Other Internal and External Considerations
Affecting Price Decisions
Analyzing the Price-Demand Relationship

The demand curve shows the number of units the market will
buy in a given period at different prices.
Normally, demand and price are inversely related
Higher price = lower demand
For prestige (luxury) goods, higher price can equal higher
demand when consumers perceive higher prices as higher
quality

Ch 10 -13 Copyright 2011 Pearson Education

Other Internal and External Consideration
Affecting Price Decisions
Other External Factors

Ch 10 -14 Copyright 2011 Pearson Education

New-Product Pricing Strategies

Ch 10 -15 Copyright 2011 Pearson Education

 New-Product Pricing Strategies

Market-skimming pricing is a strategy with high initial

prices to skim revenue layers from the market.
Product quality and image must support the price
Buyers must want the product at the price
Competitors should not be able to enter the market easily

Ch 10 -16 Copyright 2011 Pearson Education

 New-Product Pricing Strategies

Market-penetration pricing sets a low initial price in order to

penetrate the market quickly and deeply to attract a large
number of buyers quickly to gain market share.
Price sensitive market
Low prices must keep competition out of the market

Ch 10 -17 Copyright 2011 Pearson Education

Price-Adjustment Strategies

Ch 10 -18 Copyright 2011 Pearson Education

 Price-Adjustment Strategies

Discount and allowance pricing reduces prices to reward

customer responses such as paying early or promoting the
product.
Discounts: cash, quantity, seasonal

Ch 10 -19 Copyright 2011 Pearson Education

 Price-Adjustment Strategies

Segmented pricing is used when a company sells a product

at two or more prices even though the difference is not based
on cost.
Customer
Product form
Location

Ch 10 -20 Copyright 2011 Pearson Education

 Price-Adjustment Strategies

For Segmented Pricing to be effective:

Market must be segmentable
Segments must show different degrees of demand
Must be legal

Ch 10 -21 Copyright 2011 Pearson Education

 Price-Adjustment Strategies

Promotional pricing is when prices are temporarily priced

below list price or cost to increase demand.

Ch 10 -22 Copyright 2011 Pearson Education

 Price-Adjustment Strategies

Risks of promotional pricing

If it is used too frequently and copied by competitors, it can
create deal-prone customers who will wait for promotions
and avoid buying at regular price
Creates price wars

Ch 10 -23 Copyright 2011 Pearson Education

 Price-Adjustment Strategies
Pricing Strategies

International pricing is when prices are set in a specific

country based on country-specific factors.
Economic conditions
Competitive conditions
Laws and regulations
Infrastructure
Company marketing objective

Ch 10 -24 Copyright 2011 Pearson Education

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Ch 10 -25 Copyright 2011 Pearson Education