2. Pricing LAP 2 Nature of Pricing

3. Objectives Describe the pricing function. Explain the role of pricing in marketing.

4. Describe the pricing function. Objective

5. Jay & Paolo’s snowboardsJay & Paolo’s snowboards  $400 vs. $80  Premium vs. off-brand  Winter vs. off-season  Special order vs. local store Pricing isn’t always a straightforward task for marketers.Pricing isn’t always a straightforward task for marketers. It is, however, a very important one!It is, however, a very important one!

6. Pricing A marketing function that involves the determination of an exchange price at which the buyer and seller perceive optimum value for a good or serviceA marketing function that involves the determination of an exchange price at which the buyer and seller perceive optimum value for a good or service Important for:Important for:  Customer satisfaction  Continued success of the business Determining an exchange price— buyers and sellers agree on value.Determining an exchange price— buyers and sellers agree on value. Perceiving optimum value—buyers and sellers both feel they’re getting the best deal possible.Perceiving optimum value—buyers and sellers both feel they’re getting the best deal possible.

7. Pricing Like a tug-of-war between buyers and sellersLike a tug-of-war between buyers and sellers  Buyers—want low prices  Sellers—want high prices Trick = finding balance and satisfying both groupsTrick = finding balance and satisfying both groupsSellerBuyer

8. Characteristics of Effective Pricing RealisticRealistic  Not too low  Not too high FlexibleFlexible  Decrease in bad economic conditions  Increase in good economic conditions CompetitiveCompetitive Low price High price $4.00$1.00

9. Other Names for Prices InterestInterest Wages/SalaryWages/Salary FeesFees DuesDues FareFare AdmissionAdmission Service chargeService charge TuitionTuition RentRent Can you think of even more?Can you think of even more?

10. Who Sets Prices? Small businesses—usually owner or managerSmall businesses—usually owner or manager Large businesses—marketing departmentLarge businesses—marketing department

11. Factors Affecting Price CostsCosts Supply and demandSupply and demand Economic conditionsEconomic conditions CompetitionCompetition Government regulationsGovernment regulations Channel membersChannel members Company objectives and strategiesCompany objectives and strategies

12. Explain the role of pricing in marketing. Objective

13. Pricing and Product Decisions Product decisions involve determining what goods, services, or ideas to produce or sell that will satisfy customers’ needs and wants.Product decisions involve determining what goods, services, or ideas to produce or sell that will satisfy customers’ needs and wants. Pricing affects product decisions in the following ways:Pricing affects product decisions in the following ways:  Research  Type of research  Length of research  Amount of money spent  Materials used in production  Profit decisions  Company must determine if there is a market for a product by asking: Can we make a profit by selling it? Can we make a profit by selling it? Can we achieve the return on investment we want? Can we achieve the return on investment we want? Can we set our prices high enough to answer the first two questions with YES? Can we set our prices high enough to answer the first two questions with YES?  Customer decisions—what type of customer does the company want to attract?  Company image—what type of image does the company want to project?

14. Pricing and Promotion Decisions Promotion involves the various types of communications that marketers use to inform, persuade, or remind customers of their products.Promotion involves the various types of communications that marketers use to inform, persuade, or remind customers of their products. Pricing affects promotion decisions in the following ways:Pricing affects promotion decisions in the following ways:  Choice of medium  Amount of money spent  Time allocated to promotion

15. Pricing and Place Decisions Place involves shipping, handling, and storing products and determining when and where they will be available.Place involves shipping, handling, and storing products and determining when and where they will be available. Pricing affects place decisions in the following ways:Pricing affects place decisions in the following ways:  Choice of transportation channels  Cost varies by method of transportation.  Time is also a factor.  Where the product is offered

16. Pricing Objectives Goals that marketers keep in mind when determining pricing strategiesGoals that marketers keep in mind when determining pricing strategies May relate to:May relate to:  Profitability  Making as much profit as possible  Covering costs  Sales  Selling as many units as possible  Gaining a certain market share  Competition  Image/Prestige

17. How much did you pay for your jeans?   What factors contributed to the final price?   Consider:   Prices of competing brands   Prices of competing stores   How the jeans have been promoted   Their availability in your area   The type of store at which you purchased them   Discuss your thoughts with the class.

18. Predatory pricing   The practice of setting prices very low to drive out the competition   Illegal in many countries Some believe predatory pricing is a myth:   It is simply competition.   A business that sets prices too low would only hurt itself. What do you think?   Should predatory pricing be illegal?   Is it unethical?

19. MarkED Acknowledgments Original Developers Christopher C. Burke, Sarah Bartlett Borich, MarkED Version 1.0 Copyright © 2008 MarkED Resource Center

20. Digital-based photography sources: CORBIS CORP. Small Business Obj. A: #037 Photos copyright 1998 Corbis Corp. 750 Second Street, Encinitas, CA 92024 EYEWIRE IMAGES Money & Finance Obj. A: #MFI_061 Photos copyright Eyewire Inc. 833 Fourth Ave. SW, Suite 800 Calgary, AB, Canada

21. Copyright: All photographic digital images on this CD are owned by the aforementioned photographic resources or their licensors and are protected by the United States copyright laws, international treaty provisions, and applicable laws. No title to or intellectual property rights to the images on this CD are transferred to you. These sources retain all rights and are not to be used, digitally copied, transferred, or manipulated in any way. To do so is a violation of federal copyright laws.