oht 10.1 © pearson education limited 2003 brassington and pettitt: principles of marketing, 3rd...

OHT 10.1

© Pearson Education Limited 2003Brassington and Pettitt: Principles of Marketing, 3rd Edition

Pricing: context and concepts

OHT 10.2


Relevance of price (1 of 2)

• Generates revenues that allow organisations to create and retain customers at a profit.

• Can be used as a communicator, a bargaining tool and competitive weapon.

• Can be an important indicator of the positioning of a product/service.

• Customers equate price with the value attached to the exchange.

OHT 10.3


Relevance of price (2 of 2)

• Customers often equate price with quality.

• Customers often use price to compare competing products.

• For some products price can be the primary customer criterion for choice.

OHT 10.4


Factors influencing customers’ price assessments

Figure 10.1

OHT 10.5


Price the seller’s perspective

• A distinctive and highly visible element of the marketing mix.

• Must give out signals consistent with the other elements of the marketing mix.

• Generator of revenue.

• Provides the basis of recovering costs and creating profit.

• Pricing requires knowledge and understanding of the customer and external environment.

OHT 10.6


Pricing context - consumer markets

• Psychological factors can play an important role in consumers’ choice of purchase.

• Price negotiation in consumer markets can be difficult - the price is on the product take it or leave it.

• There are exceptions to price negotiations - for example purchasing a new car.

• Price banding can be useful in market segmentation.

OHT 10.7


Pricing context - retail and wholesale markets

• These markets take a more rational approach to price interpretation.

• They are realistic about the price they themselves can charge which helps to establish the kind of price they are looking to pay the manufacturer.

• The pricing structures need to reflect demand.

• Price discipline is expected - manufacturers should not be seen to be selling direct to the public at lower prices than retailers could set.

OHT 10.8


Non-profit markets

Non-profit organisations exist and operate for the benefit of the public rather than for the creation of profits.

These organisations encourage people to use their products/services and participate in their activities.

Pricing - selling goods at cost or subsidising costs visibly below market rates.

Price sometimes passes through a third party.

OHT 10.9


B2B markets

• The difference between price and real cost is most marked in these markets.

• The costs of installation, training, scrap, financing, etc., are all used to put the price of major purchases into perspective.

• Much effort and time is spent analysing potential purchases from all angles.

OHT 10.10


B2B markets - factors affecting costsof capital investment

Table 10.1Source: adapted from Mehta (1995).

OHT 10.11


B2B markets - factors affecting costsof capital investment (cont.)

Table 10.1 cont.Source: adapted from Mehta (1995).

OHT 10.12


External influences on price

Figure 10.2

OHT 10.13


Demand and price elasticity

• Customers’ attitudes and responsiveness to price are reflected to economic theories of demand.

• Marketers must estimate demand for products/services.

OHT 10.14


Classic demand curve

For most products if price rises, then demand falls out. If price falls then demand rises.

Figure 10.3

OHT 10.15


Demand curves

The shape of the demand curve will be influenced by:

• Changing customers tastes and needs.

• The psychological relationship the consumer has with a product/service.

• The economic ability to pay.

• Fluctuations in real disposable income.

• The availability and pricing of close substitute products.

• The influence of marketers.

OHT 10.16


The boomerang demand curve

Figure 10.4

OHT 10.17


Elastic and inelastic demand curves

Figure 10.6 and 10.7

OHT 10.18


Factors influencing price sensitivity

Table 10.2Source: Based on Nagle (1987).

OHT 10.19


Factors influencing price sensitivityin B2B markets

Table 10.3Source: Based on Porter (1980).

OHT 10.20


Internal influences on the pricing decision

Figure 10.8

OHT 10.21


SEM influence on pricing (1 of 2)

• The single European Market (SEM) has removed the fiscal, physical and technical barriers to trade.

• Greater price transparency across member states.

• Greater opportunity for Eurobrand building with a common positioning.

• Removal of exchange rate fluctuations and currency hedgings leading to more stable conditions and reduction in costs.

• Disturbance of established price perceptions and consumer brand values.

OHT 10.22


SEM influence on pricing (2 of 2)

• Prices may be forced downwards due to decreased costs, opening up of public procurement contracts, foreign investment, enforcement of competition policy, and an increase in competitive activity in the EU.

• Prices could also rise if non-EU competition is stifled.

oht 10.1 © pearson education limited 2003 brassington and pettitt: principles of marketing, 3rd...

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