2. Questions to answer
1. What is the price you pay for your apartment?
-rent
2. What is the price you pay for your education?
-tuition
3. What is the price you pay to your doctor or
dentist?
-a fee
4. What is the price you pay to the airline, taxi
and bus companies?
-a fare
5. What is the price you pay for the local services?
-a rate
3. Questions to answer
6.What is the price you pay for the money you borrow?
-charges and interest
7. What is the price you pay for driving your car on a
motorway?
-a toll
. What is the price you pay to the company that insures
you?
-premium
9. What is the price you pay to the guest speaker?
-an honorarium
10. What is the price paid to the government official to
help some character steal?
4. Questions to answer
8-a bribe
11. What is the price collected by the trade union?
-dues
12. What is the price you pay to your regular lawyer to
cover his/her services?
-a retainer
13. What is the price of an executive?
-a salary
14. What is the price of a salesperson?
-a commission
15. What is the price of a worker?
-a wage
5. The role and perception of price
Price is the value that is placed on
something.
Price is any common currency of
value to both buyer and seller.
Price directly generates the
revenues, serves as a
communicator, a bargaining tool and
a competitive weapon.
6. The customer’s perspective
Price represents the value they attach
to whatever is being exchanged.
In assessing price, the customer is
looking specifically at the expected
benefits of the products:
8. The seller’s perspective
Profit = Total revenue – Total cost
Total revenue = Quantity sold *
Unit price
Total cost = Production cost +
Marketing cost + Selling cost
9. Psychological effects of price
Low price = negative statement about
the product’s quality.
A sudden reduction in price of an
established product = quality has
been compromised.
High price might actually attract
customers.
10. External influences on pricing
1. Customers and consumers
2. Demand and price elasticity
3. Channels of distribution
4. Competitors
5. Legal and regulatory framework
11. External influences on pricing
1. Customers and
consumers
What the market will tolerate
The bigger the
area, the more
discretion the
marketer has in COSTS
setting price.
12. External influences on pricing
2. Demand and price elasticity
Demand determinants
Changing consumer taste and needs
Recession
Competitors’ products and price
Price elasticity of demand
Sales respond to price variations: elastic.
Sales stable after price change: inelastic.
14. External influences on pricing
4. Competitors:
Monopoly: only 1 supplier - rare
Oligopoly: a small number of powerful
providers dominate the market.
Monopolistic competition: competitors,
each with differentiated product.
Perfect competition: competitors, each
with products undistinguishable - rare
17. Internal influences on pricing
1. Organisational objectives
Corporate strategy: target volume
sales, target value sales, target growth,
target profit figures
Market leader or niche
New entrant or established
Can be both short-term and long-term
18. Internal influences on pricing
2. Marketing objectives
Focus on specific target markets and
the position desired with them.
Depends on product’s life cycle:
Intro. stage: lower price - invite trial
Growth & early maturity: raise price
Late maturity & decline: price reduction
19. Internal influences on pricing
3. Costs
Total costs include:
Operating and
Servicing costs
A product’s selling price generally
represents:
Its total cost (unit cost plus overheads), &
Profit or “risk reward”
20. The process of price setting
Pricing Demand
Pricing policies Setting the Pricing tactics
objectives assessment
& strategies price range & adjustments
21. 1. Pricing objectives
Financial objectives: short/long-term
Sales and marketing objectives
Market share and positioning
Volume sales
Status quo: preserve the status quo –
happy with current situation
Price war (undercutting), price matching,
improve product / service / communication
Survival
22. 2. Demand assessment
Marketers need to assess demand
levels for a product at any given price.
This involves a great deal of
managerial skills as there are many
variables.
23. 3. Pricing policies and strategies
New product pricing strategies
Price skimming: high price, then lower
Penetration pricing: low price, then high up
Product mix pricing strategies:
A product range starts with basic products,
then price steps up with additional features
Managing price changes:
Price are not static because of competitive
pressure, Cost inflation, new opportunities
24. 4. Setting the price range
The cost-volume-profit relationship
Fixed costs
Variable costs
Marginal costs
Total costs
Setting the price range
Cost-based method
Demand-based method
Competition-based method
25. The cost-volume-profit
relationship
Fixed costs: do not vary with output in
the short term (salaries, rent, etc.)
Variable costs: vary according to the
quantity produced (raw materials, etc.)
Marginal costs: change that occurs to
total cost if 1 more unit is added
Total costs: all the cost incurred
Breakeven analysis: the point at which
total revenue = total cost
26. A. Cost-based methods
Mark-up price = costs + profit
(giá cộng lời vào vốn)
Cost-plus pricing = costs + fix %
(định giá có lãi)
Experience curve pricing (định giá
theo đường cong kinh nghiệm)
27. B. Demand-based pricing
When demand is strong, the price goes
up; when it is weak, the price goes down.
Need a good understanding of the nature
and elasticity of demand.
Psychological pricing: customer-based
Rely on the consumer’s emotive responses,
subjective assessments and feelings.
Applicable to higher involvement products.
28. C. Competition-based pricing
Depends on:
The structure of the market
The product’s perceived value in the market
Can be:
Cost-leader with price-oriented approach
Price-follower bases on the going-rate for
the product
29. 5. Pricing tactics and adjustments
Price can vary to reflect specific
customer needs, the market position.
Marketers should set up a framework
for pricing discretion.
Special adjustments can be made for
short-term promotional purposes
Discounts, allowances, trade-in
Zoned pricing: single, multiple zones