Factors to Consider When Setting Prices
Target costing starts with an ideal selling price based on consumer value considerations and then targets costs that will ensure that the price is met
Other Internal and External Considerations
Factors to Consider When Setting Prices
Before setting prices, the marketer must understand the relationship between price and demand for its products
Other Internal and External Considerations
The Market and Demand
Factors to Consider When Setting Prices
Other Internal and External Consideration
The Market and Demand
Factors to Consider When Setting Prices
Other Internal and External Considerations Affecting Price Decisions
Pure competition is a market with many buyers and sellers trading uniform commodities where no single buyer or seller has much effect on market price
Monopolistic competition is a market with many buyers and sellers who trade over a range of prices rather than a single market price with differentiated offers.
Factors to Consider When Setting Prices
Other Internal and External Considerations Affecting Price Decisions
Oligopolistic competition is a market with few sellers because it is difficult for sellers to enter a market who are highly sensitive to each other’s pricing and marketing strategies
Pure monopoly is a market with only one seller. In a regulated monopoly, the government permits a price that will yield a fair return. In a non-regulated monopoly, companies are free to set a market price.
Factors to Consider When Setting Prices
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
Other Internal and External Considerations
Factors to Consider When Setting Prices
Price elasticity of demand illustrates the response of demand to a change in price
Inelastic demand occurs when demand hardly changes when there is a small change in price
Elastic demand occurs when demand changes greatly for a small change in price
Price elasticity of demand = % change in quantity demand
% change in price
Other Internal and External Considerations
Factors to Consider When Setting Prices
Comparison of offering in terms of customer value
Strength of competitors
Competition pricing strategies
Customer price sensitivity
Other Internal and External Considerations
Competitor's Strategies
Factors to Consider When Setting Prices
Other Internal and External Consideration