MarketingExam3 - Pricing Considerations and approaches:...

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Pricing Considerations and approaches: Page 289 Price= the amount of money charged for a product or service. More broadly, it is the sum of all the values that customers give up to gain the benefits of having or using a product or service. Price is the only element in the marketing mix that produces revenue; all other elements represent cost. Prices have a direct impact on a firm’s bottom line. Major Pricing Strategies: The price the company charges will fall somewhere between one that is too high to produce any demand and one that is too low to produce a profit. If customers perceive the price is greater than its value, they will not buy the product. Product costs set the floor for prices. Customer value-Based Pricing: Pricing decisions, like other marketing mix decisions, must start with customer value. Customer value based pricing uses buyer’s perceptions of value, not the sellers cost, as the key to pricing. This means that the marketer cannot design a product and marketing program and then set the price. Price is considered along with all other marketing mix products BEFORE the marketing program is set. Cost-based pricing is often product driven. Value based pricing first assess customer needs and value perceptions, and the price is set to match perceived value. “Good value” is not the same as “low price”. *Value based pricing V.S. Cost based Pricing-Page 292* Good value Pricing: Offering the right combination of quality and good service at a fair price. In many cases, this has involved introducing less-expensive versions of established brand name products. An important type of good value pricing at the retail level is ‘everyday low pricing’. It involves charging a constant, everyday low price with few or no temporary price discounts. In contrast, high-low pricing involves charging higher prices on an everyday basis, but running frequent promotions to lower prices temporarily on selected items. Value added pricing: Attaching value added features and services to differentiate a company’s offers and charging higher prices. Rather than cutting prices to match competitors, they attach features and services to differentiate their offers and support higher prices. Cost Based Pricing: Is setting prices based on the cost of producing, distributing, and selling the product, plus a fair rate of return for effort and risk. A company’ cost may be an important element in its pricing strategy. Companies with lower costs can set lower prices that result in smaller margins but greater sales and profits. however, other company’s intent ally pay higher costs so that they can claim higher costs and margins. Types of Costs: Fixed costs (overhead): Costs that do not vary with production or sales level. Variable costs:
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This note was uploaded on 10/25/2011 for the course ACG 3341 taught by Professor Jomosankara during the Spring '09 term at FAU.

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MarketingExam3 - Pricing Considerations and approaches:...

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