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mktg chp9 - Marketing: An Introduction Chapter 9- Pricing:...

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Marketing: An Introduction Chapter 9- Pricing: Understanding and Capturing Customer Value What is Price? Price- the amount of money charged for a product or service, or the sum of all the values that customers give up in order to gain the benefits of having or using a product or service Factors to Consider when Setting Prices Customer perceptions of product’s value set the ceiling for prices Product costs set the floor for prices Customer Perceptions of Value Value-Based Pricing o Value-based pricing- setting price based on buyers’ perceptions of value rather than on the seller’s cost o Price is considered with other marketing mix variables before the marketing program’s set o Company sets its target price based on customer perceptions of product value, the targeted value and price drive decisions about product design and what costs can be incurred o Good-Value Pricing Good-value pricing- offering just the right combination of quality and good service at a fair price Introducing less-expensive versions of established brand-name products (dollar menu) Every day low pricing- low prices with less temporary discounts High-low pricing= higher prices everyday with frequent promotions o Value-Added Pricing Value-added pricing- attaching value-added features and services to differentiate a marketing offer and support higher prices, rather than cutting prices to math competitors Pricing power- power to escape price competition and to justify higher prices and margins without losing market share Price above the competitor, and convince the customer its worth it Company and Product Costs Types of Costs o Fixed costs/overhead- costs that don’t vary with production/sales level Must pay rent bills, salaries etc. regardless of company’s output o Variable costs- costs that vary directly with the level of production o Total costs- the sum of the fixed and variable costs for any given level of production Cost-Based Pricing o Cost-plus pricing- adding a standard markup to the cost of the product o Tying pricing to costs simplifies pricing, its hard to estimate perceived value
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o Break-even pricing/target profit pricing- setting price to break even on the costs of making and marketing a product; or setting price to make a target profit Fails to acknowledge relationship between supply and demand Can help determine minimum prices needed to cover expected costs and profits Other Internal and External Considerations Affecting Price Decisions Internal factors affecting pricing- company’s overall marketing strategy, objectives, and marketing mix, other organizational considerations External factors- nature of the market and demand, competitors’ strategies and prices, other environmental factors Overall Marketing Strategy, Objectives, and Mix o Before setting price company must decide on overall marketing strategy for product/service o General pricing objectives- survival, current profit maximization, market share
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This note was uploaded on 04/10/2008 for the course MKTG 290 taught by Professor Zeno during the Spring '08 term at Ramapo.

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mktg chp9 - Marketing: An Introduction Chapter 9- Pricing:...

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