1. Pricing Decisions
Week 8 Ch 10

2. Pricing Decisions
 Pricing is important factor as it directly relates to the product
positioning.
 When a product is positioned incorrectly it is subjected to
unfair competition.
 Businesses make strategic decisions regarding pricing in
order to meet their organisational objectives.
 Businesses consider internal and external elements when
price setting
 The right price, pricing strategy that meet both organisational
objectives and needs of customers.

3. Price Setting
 Business need to consider when price setting
1. Value based Pricing
= Centralises the perception and values of customer i.e value of
soft drink at football game as opposed to supermarket.
1. Good Value pricing
= Combines quality and services at a price customers perceive as
fair i.e a lower priced alternative product to an existing product or
adding extra quality at same value
1. Value added pricing
= focuses on increasing the features that are valued by customer
and pricing accordingly, this eliminates competition based on
price, poor marketing strategy

4. Factors which affect Pricing
 Internal Factors
= Marketing objectives, marketing mix strategy, costs, the organisation
External Factors
= Nature of the market and demand for product, competitor prices affect
other businesses, economic factors (economic state, government policies
and laws)
Monopolistic competition – able to differentiate product therefore prices
differ
 Oligopolistic Competition – small number of sellers and are influenced
strongly by what competitors are doing in the market.
 Monopoly market – only one seller who is not subjected to competition

5. New Product Pricing Strategies
 There are two widely accepted strategies for pricing
1. Market-skimming
= Setting a premium price at the initial stage – effective when
there is demand for the product and product has quality
deserving of the price
1. Marketing penetration Pricing
= Attracts more buyers and increase overall market share,
Lower prices but quantity of sales can enable the business to
offer the lower price and remain profitable

6.  Price elasticity
How sensitive the demand for a product is in relation to price
changes.
 Inelastic when [product is unique or a specialty product
 Elastic where products are of a lower quality or available
alternatives are easily accessible

7. Product Mix Pricing Strategies
 Pricing Strategies for Product Mixes include
1. Product Line Pricing
2. Optional Product/service pricing
3. Captive Product Pricing
4. By-product pricing
5. Product-bundle pricing

8. Price Adjustment Strategies
 Are important when there is some change to consumer
trends or the buying situation
Example: discounts and allowances might be appropriate
when end of season stock is needed to be sold.
Segment Pricing = price changes for different customers
regular customer might pay difference cost than online
customers.
Psychological Pricing = altering pricing perception that
customer holds. Example: advertising $19,999 than $20,000
appears less when not.

9. Other Price adjustment Strategies
 Promotional Pricing – discounts etc
 Value Pricing – combining quality and service
 Geographic pricing – absorbing or adding on transport costs
to customers in remote areas
 International Pricing – prices changes for exporting goods