Developing Pricing strategies and programs : Part 1

The only element of the marketing mix that produces revenue!

The other elements

produce costs. It is also the

easiest to adjust!

Internet especially

has had a profound

impact on buyers

and sellers!

Changing pricing environment:

Easy access to credit,

enticing market campaigns,

progressive technology

Buyers can

Get instant price comparisons from a slew of vendors

Name their price and have it met (Priceline.com)

Get free products (eg: free software products)

Monitor customer behaviour and tailor offers accordingly

Give certain customers access to special prices

Negotiate prices in online auctions and in person

Sellers can

Developing appropriate

pricing strategies and

programs is

extremely important!!

How do consumers process and evaluate

prices?

Traditionally , economists assumed

consumers were price takers.

Marketers should know that consumers actively process

price information.

How prices are perceived depends on their disposable

income, occasion of purchase, economic conditions etc

3 Key Topics to understand how consumers perceive prices.

Reference prices

Fair price, typical price, last paid price, upper bound price, lower bound price, historical competitor prices, expected future price, usual discounted price

Consumers evoke one of these frames of

reference to arrive at their perceived

price.

Price-quality inferences

Greater the price, better the quality

When information about true quality is available, this does not apply.

Price endings

The way a price ends influences a buyer’s psychology

Prices ending in odd numbers, 9,

0, 5 lures in buyers.

Recap!

How do

consumers

process and

evaluate

prices?

Reference

prices

Price - Quality

inferences

Price endings

Thank you!