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MM313 Pricing Elaborated Notes

The document outlines the principles of pricing in commercial exchanges, emphasizing that pricing is a crucial aspect of marketing that balances demand and revenue. It discusses various pricing strategies, objectives, and the impact of pricing on customer perception and value creation. Additionally, it covers regulatory influences on pricing and the importance of adapting prices based on internal and external factors.

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8 views3 pages

MM313 Pricing Elaborated Notes

The document outlines the principles of pricing in commercial exchanges, emphasizing that pricing is a crucial aspect of marketing that balances demand and revenue. It discusses various pricing strategies, objectives, and the impact of pricing on customer perception and value creation. Additionally, it covers regulatory influences on pricing and the importance of adapting prices based on internal and external factors.

Uploaded by

Kyla nicole Gonia
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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MM 313 - Pricing

Commercial Exchange Illustration


In a commercial exchange, the buyer and seller engage in a transaction where the seller provides a product or service,
and the buyer offers something of value in return, typically monetary. For example, when you purchase a smartphone,
the seller provides the device, and you pay the agreed price.

Philip Kotler: "Everything has value"


Philip Kotler emphasizes that everything has a cost associated with it, such as:

Commission: A real estate agent earns a commission for selling a house.


Tuition: Students pay tuition fees for education.
Salary: Employees receive a salary for their work.
Interest: Banks charge interest on loans.
Fee: Lawyers charge fees for legal services.
Premium: Insurance companies charge premiums for coverage.
Fare: Passengers pay fares for public transportation.
Toll: Drivers pay tolls on certain roads.
Wage: Hourly workers earn wages for their labor.

Pricing in Marketing Activity


4P's

Product: A company strategically locates its factory near raw materials to reduce costs.
Place/Distribution: Ensuring product availability in various regions.
Promotion: Advertising campaigns to spread information and recognize the brand.
Pricing: Setting a price that customers are willing to pay, balancing demand and revenue.

Pricing Effects

High Price: Luxury brands like Rolex maintain high prices to create exclusivity.
Low Price: Discount stores like Walmart offer low prices to attract budget-conscious consumers.

Value

Customers provide value in return for benefits, such as a sense of fulfillment from using a product. For instance, a gym
membership offers health benefits and a sense of achievement.

3 Market Elements to Create Value


To satisfy customers, businesses focus on:

Product: Offering high-quality goods.


Place: Ensuring products are available where needed.
Promotion: Creating awareness and interest.

Does Price Create Value?


Price segmentation involves setting different prices for different customer segments. For example, airlines offer
economy and business class tickets.
Pricing itself doesn't create value but helps in harvesting it by targeting the right audience.

Objectives

Organizations have different pricing objectives:

1. Sales-based: Increasing sales growth, like introducing new product lines.


2. Profit-based: Maximizing profit for quick cash recovery.
3. Status quo-based: Maintaining brand reputation, like Coca-Cola's community programs.

Broad Pricing Policy

Governments may regulate pricing through policies like the Suggested Retail Price (SRP) to ensure fairness.

Bases of Pricing
Penetration Pricing: Introducing a new product at a low price to attract customers, then gradually increasing it.
Skimming Pricing: Launching a product at a high price to target early adopters, then lowering it over time.

Price Strategy
Cost-Based Pricing: Adding a markup to the manufacturing cost.
Demand-Based Pricing: Adjusting prices based on demand, like seasonal discounts.
Competition-Based Pricing: Setting prices based on competitors' rates.

Implementing Price Strategy


Customary Pricing: Prices expected by customers, like $1 for a soda can.
Variable Pricing: Prices that change based on factors like raw material costs.

Different Pricing Strategies


Unbundled Pricing: Charging separately for each component, like airline baggage fees.
One Price Policy: Uniform pricing for all customers, like a fixed menu price.
Flexible Pricing: Adjusting prices in real-time, like ride-sharing apps.
Odd Pricing: Using prices like $19.99 instead of $20 to create a perception of value.
Price-Quality Association: Higher prices often imply higher quality, like luxury cars.
Prestige Pricing: Setting high prices to enhance brand image, like Gucci.
Leader Pricing: Offering lower prices to attract customers, like Procter & Gamble's soap.
Multiple Unit Pricing: Bundling products for a lower total price, like a pack of socks.
Price Lining: Offering products at different price points, like iPhone models.
Price Bundling: Selling multiple products together at a single price, like a meal deal.

Geographic Pricing
FOB (Free on Board Factory): The buyer pays for transportation from the factory.
Uniform Delivered Pricing: Same price regardless of location.
Zone Pricing: Different prices for different regions.
Base-Point Pricing: Prices based on distance from a specific point.

Price Adjustment
Adjustments are made due to factors like raw material costs or market competition. For example, a surcharge
may be added for ATM withdrawals.
Determine Price
Internal Factors: Marketing objectives and strategies.
External Factors: Market demand, competitors, and economic conditions.

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