Chapter10 Pricing Understanding and Capturing Customer Value What

Chapter-10: Pricing; Understanding and Capturing Customer Value What Is a Price? Major Pricing Strategies Customer Value-Based Pricing

• Good-value pricing • Value-Added Pricing • Cost-Based pricing – Types of Costs – Costs at Different Levels of Production – Costs as a Function of Production Experience – Cost-Plus Pricing • Break-Even Analysis and Target Profit Pricing • Break-even pricing (target return pricing) Setting price to break even on the costs of making and marketing a product or setting price to make a target return.

• • Competition-Based Pricing Other Internal and External Considerations Affecting Price Decisions Overall Marketing Strategy, Objectives, and Mix Organizational Considerations The Market and Demand

• Pricing in Different Types of Markets – – Under pure competition Under monopolistic competition Under oligopolistic competition. In a pure monopoly • Analyzing the Price-Demand Relationship • Price Elasticity of Demand The Economy Other External Factors

Chapter: 11 Pricing Strategies: Additional Consideration • • New-Product Pricing Strategies Market-Skimming pricing (price skimming) Market-Penetration pricing Product Mix Pricing Strategies Pricing Situation Description Product line pricing Setting price across entire product line Optional product pricing Pricing optional or accessory products sold with main product Captive product pricing Pricing products that must be used with the main products By-product pricing Pricing low-value by-products to get rid of them Product bundle pricing Pricing bundles of products sold together

Price Adjustment Strategies Strategy Description Discount and allowance pricing Reducing prices to reward customer responses such as paying early or promoting the product Segmented pricing Adjusting prices to allow for differences in customers, product, or locations Psychological pricing Adjusting prices for psychological effect Promotional pricing Temporarily reducing prices to increase short r -run sales Geographical pricing Adjusting prices to account for the geographic location of customers Dynamic pricing Adjusting prices continually to meet the characteristics and needs of individual customers and situations International pricing Adjusting prices for international markets

Geographical pricing • FOB-origin pricing: A geographical pricing strategy in which goods are placed free on board a carrier; the customer pays the freight from the factory to the destination. • Uniform-delivered pricing: A geographical pricing strategy in which the company charges the same price plus freight to all customers, regardless of their location. • Zone pricing: A geographical pricing strategy in which the company sets up two or more zones. All customers within a zone pay the same total price; the more distant the zone, the higher the price. • Basing-point pricing: A geographical pricing strategy in which the seller designates some city as a basing point and charges all customers the freight cost from that city to the customer. • Freight-absorption pricing: A geographical pricing strategy in which the seller absorbs all or part of the freight charges to get the desired business.

Price Changes • Initiating Price Cuts • Initiating Price Increases • Buyer Reactions to Price Changes • Competitor Reactions to Price Changes Responding to Price Changes Public Policy and Pricing • Pricing within Channel Levels • Pricing across Channel levels