price

1. Pricing

2. What Is a Price?
• Narrow Definition: The amount of money
charged or paid for a product or service.
• Broad Definition: The sum of all values
consumers exchange for the product or
service.
– Time Costs
– Cognitive and Emotional Costs
– Transaction Costs

3. Internal and External Factors Affect Prices

4. • Company and Product Costs:
– Fixed Costs:
• Costs that do not vary with production or sales level.
– Variable Costs:
• Costs that vary directly with the level of production.
Internal Factors Affecting Pricing Decisions

5. • Marketing Mix Strategy:
– Price must be coordinated with the other three
P’s (Product, Promotion and Place) to form a
consistent and effective marketing program.
Internal Factors Affecting Pricing Decisions

6. • The Market and Demand:
– Costs set price floors; demand sets price ceilings.
– Supply and Demand Curves
– Pricing in different types of markets:
• Pure competition
• Monopolistic competition
• Oligopolistic competition
• Pure monopoly
– Price elasticity of demand.
– Cross price elasticity of demand.
External Factors Affecting Pricing Decisions

7. External Factors Affecting Pricing Decisions
• Competition’s Prices Affect Our Price
– What are our competitors charging? How and Why?
– Will our pricing attract, restrict, or drive out competitors?
– How does our value compare to the competition’s?
– How strong/permanent are current competitors?
– How does competition influence price sensitivity?
– Avoiding price wars
• Other External Factors
– Economy
• Inflation
• Purchasing Power
• Business Cycle (Boom, Recession, Depression)
• Counter-cyclical products