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Chapter 10

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25 views

Chapter 10

Notes

Uploaded by

i235103
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
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Chapter 10

Pricing
Understanding and Capturing Customer Value

10-1
Pricing

Learning Objectives

• Objective 1: Answer the question “What is a price?”


and discuss the importance of pricing in today’s fast-
changing environment.

10-3
Pricing

Learning Objectives

• Objective 2: Identify the three major pricing strategies


and discuss the importance of understanding customer-
value perceptions, company costs, and competitor
strategies when setting prices.

10-4
Pricing

Learning Objective 1

• Answer the question “What is a price?” and discuss the


importance of pricing in today’s fast-changing
environment.

What Is a Price?

10-5
What Is a Price?

Price is the amount of money charged for a


product or service, or the sum of all the values
that customers exchange for the benefits of
having or using the product or service.

10-6
Pricing

Learning Objective 2

• Identify the three major pricing strategies and discuss


the importance of understanding customer-value
perceptions, company costs, and competitor strategies
when setting prices.

Major Pricing Strategies

10-8
Major Pricing Strategies

FIGURE | 10.1 Considerations in Setting Price

10-9
Major Pricing Strategies
Customer Value-Based Pricing

Value-based pricing uses the buyers’ perceptions of


value rather than the seller’s cost.
• Value-based pricing is customer driven.
• Cost-based pricing is product driven.
• Price is set to match perceived value.

10-10
Major Pricing Strategies

Figure 10.2: Value-Based Pricing vs. Cost-Based Pricing

10-11
Major Pricing Strategies
Customer Value-Based Pricing

Good-value pricing is offering just the right


combination of quality and good service at a
fair price.

10-12
Major Pricing Strategies
Customer Value-Based Pricing

Everyday low
pricing (EDLP)
involves charging
a constant
everyday low
price with few or
no temporary
price discounts.
10-13
Major Pricing Strategies
Customer Value-Based Pricing

High-low pricing involves charging higher prices


on an everyday basis but running frequent
promotions to lower prices temporarily on
selected items.

10-14
Major Pricing Strategies
Customer Value-Based Pricing

Value-added pricing attaches value-added


features and services to differentiate a
company’s offers and charging higher prices.

10-15
Major Pricing Strategies
Cost-Based Pricing

Cost-based pricing sets prices based on the


costs for producing, distributing, and selling
the product plus a fair rate of return for effort
and risk.

Copyright © 2016 Pearson Education, Inc. 10-16


Major Pricing Strategies
Cost-Based Pricing

Fixed costs are the costs that do not vary with


production or sales level.
• Rent
• Heat
• Interest
• Executive salaries

Copyright © 2016 Pearson Education, Inc. 10-17


Major Pricing Strategies
Cost-Based Pricing

Variable costs vary directly with the level of


production.
• Raw materials
• Packaging

10-18
Major Pricing Strategies
Cost-Based Pricing

Total costs are the sum of the fixed and variable


costs for any given level of production.

10-19
Major Pricing Strategies
Cost-Based Pricing

Cost-plus pricing adds a standard markup to the cost of


the product.
• Benefits
• Sellers are certain about costs.
• Price competition is minimized.
• Buyers feel it is fair.
• Disadvantages
• Ignores demand and competitor prices

10-22
Major Pricing Strategies
Cost-Based Pricing

Break-even pricing
(target return
pricing) is setting
price to break even
on costs of making
and marketing a
product, or setting
price to make a
target return.

10-23
Major Pricing Strategies
Cost-Based Pricing

20
Major Pricing Strategies

Competition-based pricing

Competition-
based pricing is
setting prices
based on
competitors’
strategies, costs,
prices, and
market offerings.

10-24

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