developing pricing strategies and programs
CHAPTER 5
Developing Pricing Strategies and Programs CLASS NOTES
OBJECTIVES— § Define the internal factors affecting a firm's pricing decisions. § Identify the external factors affecting a firm's pricing decisions. § How do consumers process and evaluate prices? § How should a company set prices initially for products/services? § How should a company adapt prices to meet varying circumstances and opportunities?
I. Price, the second "P"— it is the sum of all the values that consumers exchange for benefits of having the product/service. § It has been the major factor affecting buyer choice. § But nonprice factors have become increasingly important due to the increasing affluence of developed economies. § Price is the only element in the marketing mix that produces revenues as the other represent costs, thus it is CRITICAL to understand thoroughly. § Common pricing mistakes: 1. Too cost-‐oriented rather than customer value-‐oriented. 2. Not revised often enough to reflect market changes. 3. Not taking the other 3 "Ps" into consideration. 4. Not varied enough for different products (in the mix), market segments, or purchase occasions.
II. Factors affecting pricing decisions – the Five Cs of Pricing A.
Developing Pricing Strategies and Programs CLASS NOTES
OBJECTIVES— § Define the internal factors affecting a firm's pricing decisions. § Identify the external factors affecting a firm's pricing decisions. § How do consumers process and evaluate prices? § How should a company set prices initially for products/services? § How should a company adapt prices to meet varying circumstances and opportunities?
I. Price, the second "P"— it is the sum of all the values that consumers exchange for benefits of having the product/service. § It has been the major factor affecting buyer choice. § But nonprice factors have become increasingly important due to the increasing affluence of developed economies. § Price is the only element in the marketing mix that produces revenues as the other represent costs, thus it is CRITICAL to understand thoroughly. § Common pricing mistakes: 1. Too cost-‐oriented rather than customer value-‐oriented. 2. Not revised often enough to reflect market changes. 3. Not taking the other 3 "Ps" into consideration. 4. Not varied enough for different products (in the mix), market segments, or purchase occasions.
II. Factors affecting pricing decisions – the Five Cs of Pricing A.