2. Price
The only marketing mix element that produces
revenue
Most flexible element of marketing mix
Charging too much chases away potential
customers, charging too little cuts revenue
Price is dynamic because of environmental
influences
Price is the amount of money charged for a good or
service
4. INTERNAL FACTORS
Marketing objectives of the firm
The image sought by the firm through pricing
The characteristics of the product
The stage of the product in the life cycle
Cost of manufacturing and marketing
Extend of differentiation and distinctiveness of the
product
Other elements of the product mix
5. External Factors
Market chracteristics –
demand, customers, competition
Price elasticity of demand of the product
Competitors pricing strategies
Government controls/regulations on the price
Relevant legal aspects
Societal views
7. Nature of Market
And Demand
Competition
Government Policies
Other: Economy,
Resellers etc.
External Factors Affecting Pricing
Decisions
8. Marketing
Objectives
Survival
Low Prices to Cover Variable Costs and
Some Fixed Costs to Stay in Business.
Current Profit Maximization
Choose the Price that Produces the
Maximum Current Profit, Cash Flow or ROI.
Market Share Leadership
Low as Possible Prices to Become
the Market Share Leader.
Survival
Low Prices to Cover Variable Costs and
Some Fixed Costs to Stay in Business.
Product Quality Leadership
High Prices to Cover Higher
Quality
Marketing Objectives that Affect
Pricing Decisions
9. Total Costs
Sum of the Fixed and Variable Costs for a Given
Level of Production
Fixed Costs
(Overhead)
Costs that don’t
vary with sales or
production levels.
Executive Salaries
Rent
Variable Costs
Costs that do vary
directly with the
level of production.
Raw materials
Types of Cost Factors that Effect Pricing Decisions
11. Costs set lower limits
Market and demand set upper limits
Marketers must understand the
relationship between
price and demand for a product
Market and Demand Factors that
Affect Pricing Decisions
13. Costs set lower limits
Market and demand set upper limits
Marketers must understand the
relationship between
price and demand for a product
Market and Demand Factors that
Affect Pricing Decisions
14. Price
Quantity Demanded per Period
A. Inelastic Demand -
Demand Hardly Changes With
a Small Change in Price.
P2
P1
Q1Q2
Price
Quantity Demanded per Period
P’2
P’1
Q1Q2
B. Elastic Demand -
Demand Changes Greatly With
a Small Change in Price.
Price Elasticity of Demand
15. Competitors’ prices and their
possible reactions need to be
considered when setting prices
Competition
16. Pricing Objectives
A firm may choose any of the following:
1. Maximize current profits & ROI
2. Exploit competitive position
3. Survival in a competitive market
4. Balance price over product line.
17. Price versus Non price Competition
- A company engages in price competition by regularly offering
products priced as low as possible and typically accompanied
by few, if any, services
- Price competition can often be found in the retail sector
- But: A low price should not be the only competitive
advantage!
Price Competition
18. Price versus Non price Competition
- In non price competition, sellers maintain stable prices and
attempt to improve their market positions by emphasizing
other aspects of their marketing programs
- In non price competition, the emphasis is on something other
than price!
- The best approach in non price competition is to build strong
brand equity
Non price Competition
19. Setting the price
1. Setting the Pricing Objective
2.Determining Demand
3.Estimating costs
4.Analyzing competitor’s costs, prices and offers
5.Selecting a pricing method
6.Selecting the final price
