Chapter Preview We now look at the second
major marketing mix tool—pricing. If effective product development, promotion, and distribution
sow the seeds of business success, effective pricing is the harvest. Firms successful at creating customer value with the other marketing mix activities must still capture some of this
value in the prices they earn. In this chapter, we discuss the importance
of pricing, dig into three major pricing strategies, and look at
internal and external considerations that affect pricing decisions.
In the next chapter, we examine some additional pricing considerations
and approaches. For openers, let’s examine an interesting strategic pricing story.
Air Arabia introduced a new way of doing business to the airline industry
in the Middle East when it was established in 2003. Keeping
costs down by cutting expensive overheads allowed fare prices to
be set much lower than competitors without sacrificing operational
excellence, and opened the possibility of air travel up to a whole new
market segment.