Pricing (price policy)
• How do consumers process and evaluate prices?
• How should a company set prices initially for products and services?
• How should a company adapt prices to meet varying opportunities:
• When should company initiate a price change?
Price is...
• Price is the one element of the marketing mix that produces revenue – the other elements produce costs.
• Prices are perhaps the easiest element of the marketing program to adjust.
• Throughout most of history, prices were set by negotiation between buyers and sellers. Bargaining is still a sport in some areas.
Perception of price
• Reference prices: comparing an observed price to an internal reference price which customers remember or to an external frame of reference such as a posted „regular retail price.“
• Price-quality inferences: many consumers use price as an indicator of quality
• Price endings: Prices that end with 0 and 5 are common in market place. Also ending with „9“ is very popular.
The three major considerations in price setting: costs set a flooor to the price. Competitor´s prices and the price of substitutes provide an orienting point. Consumers ´ assessment of unique features establishes the price ceiling.
Selecting the final price
• Impact of other marketing activities
• Company pricing policies
• Gain-and-risk sharing pricing
• Impact of price on other parties