1. Pricing Products and Services
Marketing 1

2. What is Price? The value in money (or it’s equivalent)
placed on a good or service
Usually expressed in monetary terms
May also be expressed in non-monetary terms such as free goods or services in exchange for the purchase of a product
Barter system is oldest form of pricing
Barter is exchanging one product for another

3. Customer Value Shapes Price
Customer’s perceived value makes difference in how much they will be willing to pay
Value is anticipated satisfaction of the customer
If consumer believes they will receive higher satisfaction they will more willing to pay higher price

4. Seller Considerations of Pricing
Seller must be able to gauge where the price will rank in customer’s estimation (whether valued highly or not)
Seller objective is to set price high enough to make profit for business yet not so high that it exceeds the value perceived by the potential customer

5. Importance of Price
Involved in every marketing exchange (dentist, clothing, toll road or toll bridges, rental of apartment, wages or salaries for employees, etc.)
Price is important factor in success or failure of a business
Helps establish and maintain firm’s image, competitive edge, and profits
Customers make judgments based on price (higher price means better quality…???)

6. Key Factors In Determining Price
Internal Factors and External Factors help determine price!

7. Internal Factors Cost of Goods Operating Expenses
Product Mix (includes product quality, trendiness or consumer liking)

8. External Factors Supply and Demand Government Regulations Competition
Natural Events (Disasters)
Economic Events (Recessions)

9. Difference in Pricing Good and Service
Pricing Goods
Manufacturing
Shipping
Packaging
Storage Costs
Pricing Services
Labor
Related Product Costs
Related Equipment Costs

10. Summary
Price is the value in money (or non-monetary exchange) for the exchange of a good or service
Customers’ perception of value of product determines their willingness to pay that exchange
Seller must be able to gauge customer perception and price to generate profit but meet customer expectation
Pricing is determined by internal and external factors
Goods and services have different considerations for pricing
Pricing is KEY to business success or failure

11. Class Assignment Process Questions
What are the market factors that affect price? How might each factor affect price?
Based on the current economy, how might economists predict trends in pricing?
How do the global economy and political climate affect price? How can this be seen in today's market?
What effect do expenses have in determining the selling price? 
How does price affect place decisions?
How does the stage in the life cycle affect pricing the product?
How does supply and demand affect price?

12. Class Activity Identify Price and Break-Even Point
You must determine the price you will charge retailers for a box of disposable cleansing cloths, which is a new product. Competing brands retail for between $5.99.
Assume your cost of manufacturing and marketing this new product is $2.75 per box. Remember to include a profit margin in the price you will charge retailers.
To be competitive, you need to consider the suggested retail price that retailers will charge the final consumer. In this example assume retailers will double the price the pay for the item when calculating the price they charge their customers.
You expect to make 200,000 boxes of these disposable cloths at the price you will be charging retailers.
What will be your price to the retailer?
What will be your “break-even” point?
Break-even point is the point at which the sales revenue (income) is equal to the costs of manufacturing, distributing, and marketing the product or service.