What Is a Price?
  • The amount of money charged for a product 
   or service, or the sum of the values that custo
   mers exchange for the benefits of having or us
   ing the product or service.
  • Pricing: the only part of the marketing mix 
   that is revenue generating, all the others are c
   osts.
  FACTORS TO CONSIDER WHEN 
  SETTING PRICES
  CUSTOMER PERCEPTIONS OF VALUE 
            Considerations in Setting Price
                                     Other internal & external 
                                      Other internal & external 
                                          considerations
                                          considerations
                                  --------------------------------------------------
                                  --------------------------------------------------
                                                -
                                                 -
                  Customer         Marketing strategy, objectives, 
                  Customer          Marketing strategy, objectives,    Product 
                perception                   and mix                    Product 
                 perception                  and mix                     costs
                   of value           Nature of the market and           costs
                   of value           Nature of the market and 
                 Price ceiling               demand                    Price floor
                                             demand
                 No demand           Competitors’ strategies and    No profits below 
                                     Competitors’ strategies and 
               above this price               prices                   this price
                                              prices
               Value-Based Pricing Versus             Cost-
                                             Based Pricing
                       Cost-based pricing
                        Design a good             Determine            Set price based        Convince buyers 
                           product              product costs              on cost              of product’s 
         Not that                                                                                  value
           good 
           way              Setting prices based on the costs for producing, distributing, and 
                            selling the product plus a fair rate of return for effort and risk.
                       Value-based pricing
                       Assess customer         Set target price        Determine costs         Design product 
                        needs & value              to match              that can be             to deliver 
          Good          perceptions              customer                incurred            desired value at 
           pricing                             perceived value                                  target price
         starts with 
         customer           Setting price based on buyers’ perceptions of 
                            value rather than on seller’s cost.