High Quality Lecture Notes for Marketing Fundamentals

SMM542 Marketing Fundamentals Week 9 Lecture Notes


The Power of Pricing
 Pricing can alter the actual efficacy of products.
o Consumers who pay a discounted price for a product may derive less
actual benefit from consuming this product than consumers who
purchase and consume the exact same product but pay its regular
price.
Price
Price is the sum of all the values that customers give up to gain the benefits of
having or using a product or service.
 The Importance of Pricing
o Pricing is the only element in the marketing mix that directly generates
revenue.
o This is one of the most flexible marketing mix elements.
o Pricing is also closely linked to overall strategy.
 Acts as a ‘communicator’ to the customer
 Own Prices vs Competitor Prices
 Pricing Strategies
o Cost-Bases Pricing
 This form of pricing refers to setting a price based on the costs
of producing, distributing, selling the product, plus a fair rate of
return for the company’s effort and risk.
 Advantages:
 Simple to calculate
 More certainty about cost than about value/demand.
 Disadvantages:
 Fails to Consider:
o Target Segment
o Competition
o Product Life Cycle
o Brand Image
o Value Appropriation
 Value appropriation seeks to find out the customer value of a
product & what the customer is willing to pay.
 This method is not easy as it is subjective and sometimes
difficult for customers to answer.
 It is a qualitative method to understand value perception
 Measuring the willingness to pay:
 Stated Preference
 Revealed Preference
o Competition-Based Pricing
 Might not reflect true customer value
 Price could ignore production costs