Ch. 9 Marketing

Pricing: Uderstanding and Capturing Customer Value

What is the definition of Price?

Price = the sum of all values that the customer gives up in order to gain the benefits of having or using a product or service.

What are the 3 major pricing strategies?

* customer value-based pricing
* cost-based pricing
* competition-based pricing

What is the price ceiling defined by?

Customer perceptions of a product’s value.

What is the Price floor defined by?

Costs

What is the best strategy for setting prices (what optimizes profit and sales volume?)

Value-based pricing tell us what the most customers will be willing to pay and allow us to have an accurate understanding of potential sales.

What are the internal factors that influence pricing?

* overall marketing strategy
* objectives
* marketing mix
* (other organizational considerations)

What are the most common pricing objectives?

* customer retention
* building profitable customer relationships
* preventing competition
* supporting resellers and gaining their support
* avoiding government intervention

What are examples of external pricing considerations?

* the economy
* reseller needs
* government actions

What are the two extreme options to pricing structures and what do they achieve?

* market-skimming pricing (increase revenue/sale)
* market-penetrating pricing (increase market share)

What pricing structure allows for maximum profits of the whole offering?

Product Line Pricing

What else must the company set prices for outside of the main product?

* Optional Products
* Optional or accessory products included with the main product (phone cases)
* Captive Products
* required for the use of the main product (charging cords)
* By-Products
* waste or residual products from the production of the main product (garbage from production)
* Product Bundles
* Combos at a reduced price (the phone and a case)

What are types of price adjustment strategy?

* discount and allowance pricing (different kinds of sales)
* segmented pricing (toyotas)
* psychological pricing (la mer)
* promotional pricing (sales)
* geographical pricing (the territories having more expensive peanut butter)
* dynamic pricing (changes regularly, oil)
* international pricing (iPhones)