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Lecture fundamentals of marketing - Lecture 16: Pricing: Understanding and capturing customer Value

We now look at the second major marketing mix tool pricing. If effective product development, promotion, and distribution sow the seeds of business success, effective pricing is the harvest. Firms successful at creating customer value with the other marketing mix activities must still capture some of this value in the prices they earn. In this chapter, we discuss the importance of pricing, dig into three major pricing strategies, and look at internal and external considerations that affect pricing decisions. | LECTURE 16 Copyright 2012 Pearson Education Inc. 1- 1- 11 Publishing as Prentice Hall Topic Outline What Is a Price Major Pricing Strategies Other Internal and External Considerations Affecting Price Decisions Copyright 2012 Pearson Education Inc. 1- 2 Publishing as Prentice Hall What Is a Price Price is the amount of money charged for a product or service. It is the sum of all the values that consumers give up in order to gain the benefits of having or using a product or service. Price is the only element in the marketing mix that produces revenue all other elements represent costs Copyright 2012 Pearson Education Inc. 1- 3 Publishing as Prentice Hall Major Pricing Strategies Customer Value-Based Pricing Understanding how much value consumers place on the benefits they receive from the product and setting a price that captures that value Copyright 2012 Pearson Education Inc. 1- 4 Publishing as Prentice Hall Major Pricing Strategies Customer Value-Based Pricing Copyright 2012 Pearson Education Inc. 1- 5 Publishing as Prentice Hall Major Pricing Strategies Customer Value-Based Pricing Value-based pricing uses the buyers perceptions of value not the sellers cost as the key to pricing. Price is considered before the marketing program is set. Value-based pricing is customer driven Cost-based pricing is product Copyright 2012 Pearson Education Inc. driven Publishing as Prentice Hall 1- 6 Major Pricing Strategies Customer Value-Based Pricing Copyright 2012 Pearson Education Inc. 1- 7 Publishing as Prentice Hall Major Pricing Strategies Customer Value-Based Pricing Good-value pricing offers the right combination of quality and good service at a fair price Copyright 2012 Pearson Education Inc. 1- 8 Publishing as Prentice Hall Major Pricing Strategies Customer Value-Based Pricing Everyday low pricing EDLP charging a constant everyday low price with few or no temporary price discounts Copyright 2012 Pearson Education Inc. 1- 9 Publishing as Prentice Hall Major Pricing .