PAZARLAMA YÖNETİMİ

Price is the amount of money paid by consumers to possess a product or get a service. A broader definition is that; price is the total of all the values, which customers sacrifice in order to benefit from using or having a product or service.

Price can be set between two limits. The upper limit is customer value while the lower one is cost. The gap between these limits is called “Strategic Pricing Gap”.

Price can be affected by many factors. These factors can be grouped as external and internal factors. The external factors include market and demand structure, economic factors, competitors’ costs and prices, distribution channels, legal regulations, and societal concerns. No single company can affect external factors; therefore, companies should adapt them. On the other hand, a company can manage internal factors such as costs, pricing aims of the firm, and diverse variables driven by other elements of marketing mix.

Predatory pricing is to charge a too low price (sometimes below the cost) to drive a competitor out of business.

In value-based pricing, customers’ value is used to charge a price for a product. Because the strategy is customer-driven, starting point is consumer.

Cost-based pricing includes different approaches such as cost-plus pricing or standard mark-up, break-even analysis, and target profit pricing.

The pricing strategies change in different stages of product life cycle. Two pricing strategies can be used in the introductory stage: market-skimming and market-penetration. Market-skimming pricing sets high prices to skim higher revenue from the market. Prices are dropped to attract new buyers after a while. In other words, prices are decreased step by step to sell the products to new consumers. In market-penetration pricing, companies set low prices to penetrate the market as much as possible.

Companies start to set prices by considering the whole marketing mix rather than just the product itself. In this way, profits can be maximized. There are six different product mix pricing strategies including product line pricing, by-product pricing, optional-product pricing, captive-product pricing, two-part pricing, and product bundle pricing.

Markets are so dynamic; therefore, prices should be adapted to the fast changing environment. There are many price-adjustment strategies including dynamic pricing, psychological pricing, discount and allowance pricing, segmented pricing, geographical pricing, promotional pricing, and international pricing. In dynamic pricing, prices are being adjusted continually to maximize revenue. For example, prices are changing thousands times a day in the airline sector.

Price changes involve price cut and price increase. Companies cut prices to increase sales and market share in case of excess capacity or insufficient demand. On the other hand, increased demand, inflation, or prices lack of supply cause price increase.

Price can be set between two limits. The upper limit is customer value while the lower one is cost.

A company can manage internal factors such as costs, pricing aims of the firm, and diverse variables driven by other elements of marketing mix.

Deceptive pricing involves price deals which mislead consumers. Price fixing is a conspiracy in which two or more competitors set prices together. In predatory pricing, a too low price (sometimes below the cost) is charged to drive a competitor out of business

Cost is the lower limit of price (or price floor). There are different kinds of costs including fixed costs, variable costs, and total costs. Fixed costs refer to costs which are independent from the level of production. For example, rental fee should be paid monthly regardless of production or sales level. Variable costs are the ones that vary based on production level17. For instance, inputs of a car such as materials, tires, etc. vary with the level of production.

Determine prices at levels that will maintain production and employment of workers.

In competitor-based pricing, price is determined by considering the market or competitors.

So far, price, factors affecting price, and major pricing strategies have been discussed. This part focuses on price setting process. This process consists of six steps

Price is the amount of money paid by consumers to possess a product or get a service. The correct answer is D.

Price is one of the major factors affecting consumers’ purchase decisions. Price is more important for consumers in developing countries than consumers in developed countries. As the level of development of countries increases, the importance given to price decreases. Non-price factors such as consumer tastes or preferences are more important in developed countries.

Price differs from other marketing mix elements due to some reasons. Firstly, it produces revenue while others create a cost. Companies bear the costs of other marketing mix elements to create value for consumers while price captures value from them. Secondly, price is the most flexible element of the marketing mix. In other words, a change in price is reflected on demand immediately. Therefore, it is a strategic tool used by companies. However, companies should be careful while using price as a strategic tool because of its psychological effects on consumers. Lastly, price has a negative relationship with demand. This means that if the price of a product increases, the demand of it decreases and vice versa. Besides these differences, price should be consistent with other marketing mix elements. The correct answer is D.

The difference between price and cost is company’s profit margin while the difference between price and customer value is consumer surplus. The correct answer is B.