Developing Pricing Strategies and Programs

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[pic] 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. Price also communicates to the market the company’s intended value positioning of its product or brand. A well-designed and marketed product can command a price premium. [pic] Pricing decisions are clearly complex and difficult. Holistic marketers must take into account many factors in making pricing decision—the company, customers, competition, and marketing environment. Pricing decisions must be consistent with the firm’s marketing strategy and its target markets and brand positionings. . UNDERSTANDING PRICING

[pic] Price is not just a number on a tag or an item.
A) Throughout most of history prices were set by negotiation between buyers and sellers. B) Setting one price for all buyers is a relatively modern idea. C) Today the Internet is partially reversing the fixed pricing trend. D) Traditionally, price has operated as the major determinant of buyer choice. E) Price remains one of the most important elements determining market share and profitability. How Companies Price

[pic] Companies do their pricing in a variety of ways.
A) In small companies, prices are often set by the boss. B) In large companies, pricing is handled by division and product-line managers. C) In large companies, top management sets general pricing objectives, policies, and often approves the prices proposed by lower levels of management. D) In industries where pricing is a key factor, companies will often establish a pricing department to set or assist others in determining appropriate prices. E) Many companies do not handle pricing well.

F) Others use price as a key strategic tool.
1) There are customized prices and offerings based on segment value and costs. G)Effectively designing and implementing pricing strategies requires a thorough understanding of consumer pricing psychology and a systematic approach to setting, adapting, and changing prices. . Consumer Psychology and Pricing

[pic] Marketers recognize that consumers often actively process price information, interpreting prices in terms of their knowledge from prior purchasing experiences, formal communications, and point-of-purchase or online resources. A) Purchase decisions are based on how consumers perceive prices. B) What they consider the current actual price—not the marketer’s stated price. C) Consumers may have a lower price threshold below which prices may signal inferior or unacceptable quality. D) Upper price threshold above which prices are prohibitive and seen as not worth the money . Reference Prices

[pic] When examining products, consumers often employ reference prices. A) In considering an observed price, consumers often compare it to an internal reference price (pricing from memory). B) An external frame of reference (posted “regular retail price”). C) All types of reference prices are possible.

[pic] Table 14.1 illustrates possible consumer reference pricing. D) Sellers often attempt to manipulate reference prices. E) Reference-price thinking is also encouraged by stating a high manufacturer’s suggested price or: 1) By indicating that the product was priced much higher originally. 2) By pointing to a competitor’s high price.

F) Clever marketers try to frame the price to signal the best value possible. G) When consumers evoke one or more of these frames of reference, their perceived price can vary from the stated price. Price Cues

A) Consumer perceptions of prices are also affected by alternative pricing strategies. B) Many sellers believe that prices should end in an odd number. C) Research has shown that consumers tend to process prices in a “left-to-right” manner rather than by rounding. D) “Sale” signs next to prices have been shown...
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