Scribd
Upload
40 views45 pages

8 - Pricing

This chapter discusses pricing strategies and considerations. It defines pricing as the cost that indicates a product's value and is paid by consumers. There are four factors to consider when pricing: marketing objectives, costs, target groups, and competition. The chapter also outlines seven product pricing strategies, three general pricing approaches, and five price adjustment strategies.

Uploaded by

haruatienza
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
40 views45 pages

8 - Pricing

This chapter discusses pricing strategies and considerations. It defines pricing as the cost that indicates a product's value and is paid by consumers. There are four factors to consider when pricing: marketing objectives, costs, target groups, and competition. The chapter also outlines seven product pricing strategies, three general pricing approaches, and five price adjustment strategies.

Uploaded by

haruatienza
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
You are on page 1/ 45

Chapter 8

PRICING
(Support Ps)
QUESTION ???
How “pricing” is considered
as an important factor
before you purchase a
particular goods or services?
OBJECTIVES
1. To be familiar with the different
price-quality points.
2. To have alternative methods
for setting a product’s price.
3. To have a greater
understanding of using price as
a communication tool.
PRICING
Pricing is defined as the cost of the
product that indicates its value. It is the
amount of money that the consumer pays
to own a product.
Four Factors to
Consider When
Pricing
1. Marketing Objectives
are the specific target
that a business would
like to achieve in one
year, five years, or within
10 years
2. Fixed and Variable Cost
Fixed Cost is defined as a cost
that does not change with an
increase or decrease in the
amount of goods or services
produced. Examples are rent,
insurance, or loan payments.
2. Fixed and Variable Cost
Variable Cost is defined as a
cost that is dependent on the
number of units produced or
rendered. Examples are raw
materials and packaging or a
product and the like.
3. Target Group and
Willingness to Pay – you need
to consider the value attached
by the target market to the
product offering. That means
the amount they can afford
and the amount that they
willing to pay.
4. Competition – the marketplace may offer
substitutes for your product and consumers
also be looking for variety.
Thus, companies should always make sure
that they are updated in their product
offering and trends in the market.
Seven Product
Pricing
Strategies
1. Product Line Pricing

It is a pricing strategy used when a


company has more than one product in a
line and would like to create different value
levels in the minds of the consumers.
Pricing different
products within
the same
product range at
different price
points.
The greater the
features and the
benefit obtained,
the greater the
consumer will
pay.
2. Optional Product Pricing

It is a pricing strategy used when a


company sells a base product at a low price
but sells complementary accessories at a
higher price.
An airline company
offering low price
tickets but charges
high for accessories
like check-in baggage
and in-flight foods.
3. Captive Product Pricing

It is a pricing strategy used when a


company sells products that must be used
with the main product.
Captive product
pricing is the pricing
of products that have
both a “core product”
and a number of
“accessory products.”
The core product
is bought once
while the
accessories are
purchased over
and over again,
or as necessary.
4. By-Product Pricing

It is a pricing strategy used when a


company prices by products that have no
value for the company so that disposal and
storage will not add to the cost of the
product.
A wood
manufacturing
company sells
their scrap
materials to a
junk shop firm.
5. Product Bundle Pricing

It is a pricing strategy used when a


company sells several products into one
combined product at a reduced price.
Value Meal
being
offered by
fast food
outlets.
Examples are Christmas Baskets
and Holiday Packs.
6. Market Penetration Pricing

It is a pricing strategy used when a


company initially offers lower than regular
market prices to enter a market. Once sales
and market share objectives are achieved,
the company will then increase the price.
A company
introductory
product offers a
new brand of
television in the
market.
7. Market Skimming Pricing
It is a pricing strategy used when a
company is the first one to market a new
high-end product or an innovative product.
Its objective is to have maximum revenue
from the market before competitors catch
on. When the objective is achieved, the
company can lower the price.
Apple iPhone
that introduce
to market by
Apple
Company.
Three General
Pricing
Approaches
1. Cost-Based Pricing

It is a pricing approach
that is based on the cost
of producing,
distributing, and
promoting the product.
2. Competition-based Pricing

It is a pricing approach
benchmark on
competitors’ prices. This is
a simple way of making a
pricing decision without
doing market research.
3. Value-based Pricing
It is a pricing approach that sets
a price based on the perceived
value of the product. This
means coming up with a price
that consumers are willing to
pay. Another term for this is
opportunity pricing.
Five Price Adjustment
Strategies
1. Discount and allowance Pricing
It is a price adjustment strategy used by
companies thru adjustment of prices to
reward consumers for their quick response
and retailers for their promotional
activities.
Discount Pricing is a straight reduction in
price on purchase.
Allowance Pricing is for B2B
transactions wherein
promotional allowance is
offered to a retailer to features
products in some way.
2. Segmented Pricing
It is a price adjustment strategy used by
which companies set different prices for a
product to consider behavioral and
psychological factors even if there
is no significant difference in
production and distribution cost.
2. Segmented Pricing
A. Market Segmented Pricing is when
customers pay different prices for the same
product or service. These are the discounts
given by cinemas for senior citizens,
students, and the like.
2. Segmented Pricing
B. Location Segmented
Pricing – different pricing of
concert tickets where prices
are high when seated on
the VIP Section.
2. Segmented Pricing
C. Time Segmented Pricing – different
times or seasons of a particular product.
3. Psychological Pricing

It is a price adjustment strategy that


sets a price using the consumer’s
emotional response to encourage sales.
3. Psychological Pricing
A. Reference Pricing – this refers to how
much consumers anticipate paying for a
product in relation to competition and
advertisement.

Roush Bersache Asian Black


P999 P 1,000 P 1,250
P 1,490
3. Psychological Pricing
B. Odd-Even Pricing – this refers to a
psychological pricing method that
considers the belief that certain prices or
price ranges are more attractive to buyers.
3. Psychological Pricing
C. Prestige Pricing – it is a physiological
pricing strategy that sets prices of luxury
products to the expectations of a niche
class of customers who associate higher
prices with superior quality.
4. Promotional Pricing
It is the adjusting prices to entice
customers to buy during the discounted
price offering period.

Entice - to attract artfully or adroitly or by arousing hope or desire


5. Geographical Pricing
It is the adjusting prices based on
geographical location. Prices increase as
shipping distances increase. Also known as
Zone Pricing Strategy.

You might also like