Scribd
Upload
236 views

Chapter 10 POM

This document discusses factors to consider when setting prices. It outlines two main types of pricing: cost-based pricing and value-based pricing. Cost-based pricing sets prices based on production and distribution costs plus a markup. Value-based pricing uses customer perceptions of value rather than costs. Other factors that influence pricing include customer perceptions, the market demand curve, and how demand responds to changes in price.

Uploaded by

Hina Fahad
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
236 views

Chapter 10 POM

This document discusses factors to consider when setting prices. It outlines two main types of pricing: cost-based pricing and value-based pricing. Cost-based pricing sets prices based on production and distribution costs plus a markup. Value-based pricing uses customer perceptions of value rather than costs. Other factors that influence pricing include customer perceptions, the market demand curve, and how demand responds to changes in price.

Uploaded by

Hina Fahad
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
You are on page 1/ 11

Chapter Ten

Pricing:
Understanding and Capturing
Customer Value
What Is a Price?

Price is the amount of money charged for a


product or service. It is the sum of all the
values that consumers give up in order to
gain the benefits of having or using a
product or service.

Price is the only element in the marketing mix


that produces revenue; all other elements
represent costs
Types of Pricing

• Two types of Pricing


1.Cost based pricing
2.Value based pricing
Factors to Consider
When Setting Prices
Company and Product Costs

Cost-based pricing involves setting prices


based on the costs for producing,
distributing, and selling the product plus a
fair rate of return for its effort and risk
Factors to Consider When
Setting Prices
Company and Product Costs

Cost-based pricing adds a standard markup to


the cost of the product
For example:
The cost to manufacture a sanitizer is Rs 50
The company want to earn a markup of 50%
The price of the product will be equal to: Rs 50
+(.5*50)= 75
Factors to Consider When
Setting Prices
Company and Product Costs
Types of costs
Factors to Consider When Setting
Prices
Customer Perceptions of Value

Value-based pricing uses the buyers’


perceptions of value, not the sellers cost,
as the key to pricing. Price is considered
before the marketing program is set.
• Value-based pricing is customer driven
whereas Cost-based pricing is product
driven
Cost based pricing vs value based
pricing
Factors to Consider When
Setting Prices
Other Internal and External Considerations

• Customer perceptions of value set the


upper limit for prices, and costs set the
lower limit
Factors to Consider When
Setting Prices
Other Internal and External Considerations
The Market and Demand

• Before setting prices, the marketer must


understand the relationship between
price and demand for its products
Factors to Consider When
Setting Prices
Other Internal and External Considerations

The demand curve shows the number of units


the market will buy in a given period at
different prices
• Normally, demand and price are inversely
related
• Higher price = lower demand
• For prestige (luxury) goods, higher price can
equal higher demand when consumers
perceive higher prices as higher quality

You might also like