Module 1: What is Price?, Slides of Marketing Management

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MODULE

WHAT IS PRICE? AN

INTRODUCTION

SUBTOPIC

S

• WHAT IS PRICE?
• OBJECTIVES OF PRICING
• THE RATIONAL’E OF PRICING
• PRICE SETTING IN CAPTURING CUSTOMER VALUE
• THE BUSINESS ENVIRONMENT IN PRICING
• IMPORTANT EXTERNAL AND INTERNAL FACTORS IN PRICING

• (^) According to Kotler and Armstrong (2009, p.
  263. the PRICE is “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 benefit of having or using a product or service.”
• (^) As for the economist’s view a PRICE is equilibrium by the forces of supply and demand in the market, whereas the accountant’s point of view includes the aspects, that a price should cover costs so that the company can make profit.

• (^) From the point of the marketing perspective, a PRICE is an opportunity to gain competitive advantage and even to increase market share (Simon and Dolan 1997, pp. 10-14).
• (^) Considering the customer, a PRICE is the amount of money the consumer has to pay and therefore it has to represent good value.
• (^) InAs PRICE is the only element in the marketing mix that produces revenue; all other elements represents costs. Furthermore the price is one of the most flexible elements in the marketing mix, as unlike distribution channel or product feature, prices can be changed quickly (Kotler and Armstrong 2009, pp. 261-263).

THE RATIONAL’E PRICING

PRICE SETTING IN CAPTURING CUSTOMER VALUE

Customer value-based pricing uses buyers’ perceptions of value, not the seller’s cost, as the key to pricing. Value- based pricing 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 variables before the marketing program is set.

Demographic

Environment

 (^) Demographic factors are related to population. Marketer must study these factors due to the fact that the market is made of people, and people constitute the population. Demographic study provides customer profile that is basic need for market segmentation as well as selecting target market.

Economic

Environment

 (^) The economy also has a tremendous effect on pricing decisions. The factors in the economic environment include interest rates and unemployment levels. When the economy is weak and many people are unemployed, companies often control their prices.

Political-Legal Environment

 (^) Pricing is influenced by laws and regulations which necessitate product modifications, in compliance with health and safety standards, environmental regulations, measures, systems, etc. Government policies influence the legislative and economic frameworks. Perhaps the most sinister cloud from the political area is the threat of wars. Pricing decisions are affected by federal and state regulations.