1. Marketing Management 2nd Edition
Michael R. Czinkota and Masaaki Kotabe
Chapter 10:
Pricing Decisions

2. Chapter Outline Importance of price Services prices
Price for non-profit organizations
Supply and demand
Price elasticity of demand
Three ways to measure demand
Factors affecting demand elasticity
Pricing strategies
Practical pricing policies
Discounts
Pricing strategy

3. - X = Importance of Price Three variables that determine profit: Sales
Volume X
Price
Cost =
Profit

4. Service Prices Differences in pricing for services: Negotiation
Discounts
Quality

5. Price for Non-Profit Organizations
Surplus
Allocation of service
Queuing
Price is perceived value.

6. Supply and Demand Equilibrium Price Supply curve Demand curve Price
Quantity

7. Price Elasticity of Demand
% change
in demand
Price elasticity
of demand =
% change
in price

8. Three Ways to Measure Demand
Statistical analysis of historical data
Survey research
Experiment

9. Factors Affecting Demand Elasticity: Organization Factors
Product life cycle
Product portfolio
Product line pricing
Segmentation and positioning
Branding

10. Factors Affecting Demand Elasticity: Customer Factors
Benefits
Value
Distribution channel

11. Factors Affecting Demand Elasticity: Market Factors
Competition
Economic and regulatory environment
Exchange rate
Geography

12. Pricing Strategies Price Skimming: Price HIGH Penetration Pricing:
Inelastic prices
New or unique product
Distinct market segments
Quality important
Competitive costs unknown
Penetration Pricing:
Price LOW
Elastic prices
Competitors can enter market
No distinct market segments
Products undifferentiated
Economies of scale

13. Practical Pricing Policies
Cost-plus pricing
Target pricing
Historical pricing
Product line pricing
Competitive pricing
Market-based pricing
Selective pricing

14. $11.99 $9.99 Discounts Trade discounts Quantity discounts
Cash discounts
Allowances
Seasonal discounts
Promotional pricing
Individual pricing
Optional features
Product bundling
Value package
Psychological pricing
$11.99
$9.99

15. Pricing Strategy
Price wars
Other price reductions
Price increases