Pricing (price policy)

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Pricing (price policy)

• How do consumers process and evaluate prices?
• How should a company set prices initially for
  products and services?
• How should a company adapt prices to meet varying
  opportunities
• When should company initiate a price change?

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Price is...

• Price is the one element of the marketing mix
  that produces revenue the other elements
  produce costs.
• Prices are perhaps the easiest element of the
  marketing program to adjust.
• Throughout most of history, prices were set by
  negotiation between buyers and sellers.
  Bargaining is still a sport in some areas.

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How companies price?

• Factors of pricing

Internal factors
External factors
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Perception of price

• Reference prices comparing an observed price to
  an internal reference price which customers
  remember or to an external frame of reference
  such as a posted regular retail price.
• Price-quality inferences many consumers use
  price as an indicator of quality
• Price endings Prices that end with 0 and 5 are
  common in market place. Also ending with 9 is
  very popular.

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The three major considerations in price setting
costs set a flooor to the price. Competitors
prices and the price of substitutes provide an
orienting point. Consumers assessment of unique
features establishes the price ceiling.
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Selecting the final price

• Impact of other marketing activities
• Company pricing policies
• Gain-and-risk sharing pricing
• Impact of price on other parties

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Adapting the price

1. Geographical pricing
2. Price discounts and allowances
3. Promotional pricing
4. Differentiated pricing