IMG_3024.jpeg

# Chapter 14: Pricing Strategies ## What is a Price? Price is the amount of money charged for a product or service, or the sum of the values that customers exchange for the benefits of having or using the product or service. ## Customer Perceptions of Value ### Value-based pricing Uses the buyer...

# Chapter 14: Pricing Strategies ## What is a Price? Price is the amount of money charged for a product or service, or the sum of the values that customers exchange for the benefits of having or using the product or service. ## Customer Perceptions of Value ### Value-based pricing Uses the buyers' perceptions of value rather than the seller's cost. * Price is considered before the marketing program is set. * Value-based pricing is customer driven. * Cost-based pricing is product driven. #### Types of value-based pricing: * **Good-value pricing:** Offering just the right combination of quality and good service at a fair price. * **Value-added pricing:** Attaching value-added features and services to differentiate a company's offers and charging higher prices. ## Company and Product Costs ### Cost-based pricing Setting prices based on the costs for producing, distributing, and selling the product plus a fair rate of return for effort and risk. #### Types of costs: * **Fixed costs (overhead):** Costs that do not vary with production or sales level. * **Variable costs:** Costs that vary directly with the level of production. * **Total costs:** The sum of the fixed and variable costs for any given level of production. ### Cost-Plus Pricing Adding a standard markup to the cost of the product. ### Break-Even Pricing Setting price to break even on the costs of making and marketing a product, or setting price to make a target return. **Break-even point:** $$ \text{Fixed cost} \div (\text{Price} - \text{Variable costs}) $$ ## Other Considerations Affecting Price Decisions ### Internal Factors * Overall marketing strategy, objectives, and mix * Organizational considerations ### External Factors * The market and demand * The economy * Impact on other parties in its environment