5. Price :
Price is amount of money charged for
product or service, It is the sum of all values
that consumers exchange for the benefit of
having or using the product or service.
6. Today’s New Pricing Environment:
In Earlier times prices were set by
negotiating between buyers and sellers. The
New Trend in pricing is Fixed Price policies-
setting one price for all buyers. Some
companies are now reversing Fixed pricing
trend, they are using Dynamic Pricing.
7. Dynamic Pricing :
Charging different prices
depending on individual costumers and
situations.
Prices can be changed according to the
demand or cost, changing prices for
specific items on day-by-day or even hour-
by-hour basis.
8. Pricing:
The evaluation of something in
terms of its price, usually based on market
demand and competition.
Factors in consideration when setting
price:
(i) Internal Factors
(ii) External Factors
10. (a) Marketing Objectives:
General Objectives include survival,
current profit maximization, market share
leadership and product quality leadership.
Specific Objectives that a company can set
prices low to prevent competition from
entering the market or set prices at
competitor's level to stabilize the market.
11. (b) Marketing Mix Strategy
Price decision must be coordinated with
product design, distribution, and promotion
decision to form consistent and effective
marketing program.
The best strategy is not to charge the
lowest price, but rather to differentiate the
marketing offer to make it worth a higher
price.
12. (c) Costs
Costs set the floor for the price that the
company can charge.
Price charged should cover all the cost of
production, distribution, and selling the
product and delivers a fair rate of return for
its efforts and risks.
13. Types of costs:
Fixed cost is the cost that do not vary with
production or sales level.
Variable cost is the cost that vary directly
with the level of production.
Total Cost is the sum of the fixed and
variables costs for any given level of
production.
14. Cost at different level of production:
The cost at different level of production
vary with the level of production as the level
increases the cost will decrease but as the
resources are insufficient, there can be a
chance of increase of cost as production
increases.
15. Cost as a function of production experience:
The cost of production decreases as the
experience in production increases, the
workers gain experience and they find short
cuts to do their work as a result there is a
decrease in the production cost .
16. (d) Organizational Consideration:
In small companies prices are often set by
top management rather then by the
marketing or sales departments.
In large companies pricing is typically
handled by divisional or product line
managers.
In industries where pricing is a key factor
companies often have a pricing department
to set the best prices or help others in
setting them.
17. External Factors effecting pricing decisions:
(i) Nature of the market and Demand
(ii) Competition
(iii) Environmental Elements
18. (i) The Market and Demand:
Costs set the lower limit of prices, the
market and demand set the upper limit.
The Marketer must understand the
relationship between price and demand for
its product.
19. Pricing in different types of Markets :
The sellers pricing freedom varies with
different types of markets.
(a) Pure Competition
(b) Monopolistic Competition
(c) Oligopolistic Competition
(d) Pure Monopoly
20. (a) Pure Competition
The market consists of many buyers and
sellers trading in a uniform commodity.
Single Buyer and Seller have no effect on
the going market price.
Sellers cannot price more or less then the
market price.
21. (b) Monopolistic Competition :
Market consists of many buyers and
sellers who trade over a range of prices
rather then a single market price.
Buyers see differences in sellers products
and will pay different prices for that.
22. In addition to price they freely use
branding, advertising and personal selling
to set their offers apart.
(c) Oligopolistic Competition:
The market consist of few sellers who are
highly sensitive to each others marketing
and pricing strategies.
23. There are few sellers because it is difficult
for new sellers to enter the market.
Each seller is alert to competitors
strategies and then moves on.
(d) Pure Monopoly :
The market consists of one seller .
24. The seller may be a government
monopoly (Pakistan railways, postal
services ), a private regulated monopoly (A
power company).
They do not always charge the full price
for a number of reasons
(1) A desire not to attract
competition
25. (2) A desire to penetrate the market faster
with a low price.
(3) A fear of government regulation.
26. Consumer Perceptions of Price and value:
At last, consumer will decide whether a
product price is right or not.
When consumer buy a product, they
exchange something of value (the price) to
get something of value (the benefits of
having or using the product).
27. Analyzing the price –Demand relationship:
The relationship between the price charged
and the resulting demand is explained by
the demand curve.
(i) Inelastic Demand
(ii) Elastic Demand
28. Price Elasticity of Demand:
A measure of the sensitivity of demand to
changes in the price.
Price elasticity of demand= % change in quantity demanded
% Change in price
29. When the demand is elastic rather then
inelastic, sellers will consider lowering
there prices which will produce more total
revenue.
Marketers need to work harder then ever
to differentiate their offering when a dozen
of competitors are selling virtually same
products at a comparable or low price.
30. General Pricing approaches :
(i) Cost-based Pricing:
(a) Cost plus pricing
(b) Break even analysis
(ii) Value based Pricing
(a) Value Pricing
(b) Value added Marketing
(iii) Competition Based Pricing
31. (i) Cost-based-Pricing
(a) Cost plus pricing:
Adding a standard markup to the cost of
product.
Cost plus pricing set the prices for the
customer to realize that the price charged is
just above the production cost.
32. (b) Break even analysis and Target profit
pricing
Setting price to break even on the costs of
making and marketing a product; or setting
price to make a desired profit.
The manufacturer should consider
different prices and estimate break even
volumes, probable demand, and profit for
each product.
33. (ii) Value based pricing
Setting price based on buyers perceptions
of value rather than on the seller’s cost.
Marketer cannot design a product and a
marketing program and then set the price.
36. (i) Value pricing
Offering just the right combination of
quality and good service at a fair price.
EDLP ( Every day low pricing) involves
charging a constant, everyday low price
with few or no temporary discounts.
37. (ii) Value Added Marketing
The challenge is to build the company’s
pricing power– its power to escape price
competition and to justify higher prices and
margins without losing market share.
Many companies attach value added
services to differentiate their offers and
thus support higher margins.
38. (iii) Competition Based Pricing
Setting prices based on the prices that
competitors charge for similar products.
It “Is the on going rate pricing” in which a
firm bases its prices largely on competitors
prices, with less attention paid to its own
cost or to demand.
39. The Price is changed as the market leader
changes its price.
Going rate pricing is quite popular, when
demand elasticity is hard to measure, firms
feel that the going price represents the
collective wisdom of the industry
concerning of the price that will yield a fair
return.
