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Principles of MarketingWe also discuss several other topics like What law states that volume and temperature have a constant pressure?
Kotler and Armstrong
Chapter 10: Pricing
Understanding and capturing customer valueIf you want to learn more check out hermaphadites
PricingDon't forget about the age old question of What is a super position?
Learning objectives
- Objective 1: Answer the question “What is a price?” and discuss the importance of pricing in today’s fast - changing environment
- Objective 2: Identify the three major pricing strategies and discuss the importance of understanding customer - strategies when setting prices
- Objective 3: identify and define the other important external and internal factors affecting a firm’s pricing decisions
**Do not have to do equations on the testDon't forget about the age old question of What is a longitudinal, flexible rod between digestive tube and nerve chord?
What is a Price?
Price is the amount of money changed for a product or service, or the sum of all the values that customers exchange for the benefits of having or using the product or service
Value for value
If you want to learn more check out cuitlahuac meaning
Major Pricing Strategies
**Need to Know**
If you want to learn more check out Wat are the 3 roman senators?
Price floor vs. price ceiling
Major Pricing Strategies
Customer Value - Based Pricing
Value - based pricing uses the buyers’ perception of value rather than the seller’s cost.
- Value - based pricing is customer driven
- Cost - based pricing is product driven
- Price is set to match perceived value
Example: “Freemium” vs Premium
Major Pricing Strategies
Customer Value - Based Pricing
Good - value pricing is offering just the right combination of quality and good service at a fair price
Example: Grocery store examination
Major Pricing Strategies
Customer Value - Based Pricing
**Walmart**
Everyday low pricing (EDLP)
Involves charging a constant everyday low price with few or no temporary price discounts
Opposite: Luxury goods
Major Pricing Strategies
Customer Value - Based Pricing
High - low pricing involves charging higher prices on an everyday basis but running frequent promotions to lower prices temporarily on selected items
Example: Bed Bath and Beyond, Hobby Lobby, etc
Major Pricing Strategies
Customer Value - Based Pricing
Value - added pricing attaches value - added features and services to differentiate the companies offers and thus their higher prices
Example: Alabama shirt plus name on back
Major Pricing Strategies
Cost - Based Pricing
Cost - based pricing sets prices based on the costs for producing, distributing, and selling the product plus a fair rate of return for effort and risk
- Trying to cover cost
- Harder to sell
Major Pricing Strategies
Cost - Based Pricing
Fixed costs are the costs that do not vary with production or sales levels (rent, heat, interest, executive salaries, etc)
variable costs vary directly with the level of production (raw materials, packaging. etc)
Total costs are the sum of a fixed and variable costs for any given level of production
TC = FC + VC
Major Pricing Strategies
Cost - Based Pricing
Cost - plus pricing adds a standard markup to the cost of the product
- Sellers are certain about costs
- Price competition is minimized
- Buyers feel it is fair
- Ignores demand and competitor prices
Major Pricing Strategies
Cost - Based Pricing
Break - even pricing (target return pricing) is setting price to break even on cost or to make a target return
TR = TC
“Have to spend money to make money”
Major Pricing Strategies
Cost - Based Pricing
Competition based pricing is setting prices based on competitors’ strategies, cost, prices, and market offerings
Other internal and external considerations affecting price decisions