Marketing Framework/Process
Introduction to Marketing
CHAPTER 1
Company & Marketing
Strategy
CHAPTER 2
Marketing Environment
CHAPTER 3
Chapter 10: Marketing Mix (4Ps): PRICE
Pricing: Understanding and Capturing Customer Value
Lesson Learning Outcomes
• LO1: Answer the question “what is price?” Discuss the importance of
pricing in today’s fast changing environment.
• LO2: Identify the three major pricing strategies
• LO3: Identify and define the other important external and internal
factors affecting a firm’s pricing decisions.
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LO1: Answer the question “what is price?” Discuss
the importance of pricing in today’s fast changing
environment.
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?
What does it mean
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What Is a Price?
Let’s think!
• High PRICE → low DEMAND
• Low PRICE → high DEMAND
• Low Price = Good value
Do you agree or NOT?
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What Is a Price?
“There are two fools in every
market—one who asks too much
and one who asks too little”
(Russian proverb)
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What Is “Price”?
$ 5,232,479
in 2017
Owned by Vietnamese emperor Bao Dai
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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.
• Price is the only element in the marketing mix that produces revenue.
• Price is one of the most flexible marketing mix elements.
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LO2: Identify the three major pricing strategies
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Major Pricing Strategies
1. Value-based pricing uses the buyers’ perceptions of value rather
than the seller’s cost.
• Value-based pricing is customer driven.
• Price is set to match perceived value.
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Major Pricing Strategies
2. 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.
Fixed costs are the costs that do not Variable costs vary directly with the level
vary with production or sales level. of production.
• Rent, Heat, Interest • Raw materials, Packaging…
• Executive salaries
Total costs are the sum of the fixed and variable costs for
any given level of production.
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Major Pricing Strategies
Cost-based pricing
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Major Pricing Strategies
3. Competition-based pricing is setting prices based on competitors’
strategies, costs, prices, and market offerings.
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Value based Vs. Cost based PRICING
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LO3: Identify and define the other important
internal & external factors affecting a firm’s
pricing decisions.
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Internal and External Considerations Affecting
Price Decisions
Overall Marketing Strategy, Objectives, and Mix
Organizational Considerations
• Who should set prices?
• Who can influence prices?
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Internal and External Considerations Affecting
Price Decisions
The Market and Demand
Before setting prices, marketer must understand the relationship
between price and demand for its products.
Pure competition
Pricing in Different
Monopolistic competition
Types of Markets
Oligopolistic competition
Pure monopoly
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Internal and External Considerations Affecting
Price Decisions
The Economy and Other External Factors
Economic conditions
Reseller’s response to price
Government
Social concerns
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Internal and External Considerations Affecting
Price Decisions
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Summary
• What is PRICE?
• Sum of the values
• 03 Pricing Strategies
• Value-based
• Cost-based
• Competition-based
• Factors affecting pricing decisions
• Overall Marketing Strategy, Objectives, and Mix
• Organizational Considerations
• The Market and Demand
• The Economy and Other External Factors
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Reviewing questions
1. How does value-based pricing differ from cost-based pricing?
2. Customers will love the lowest price, is it always true? Why or Why
not?
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