1. Part Five: Pricing Strategy
( Chapter10-Charpter11)

2. Price Defined (P.307)
Price :The amount of money charged for a product or service,or the sum of the values that consumers exchange for the benefits of having or using the product or service.
Dynamic pricing: Charging different prices depending on individual customers and situations.

3. Factors affecting price decisions (P.309)
External factors
Nature of the
market and
demand;
Competitors;
Other
environment
factors(economy,
reseller, government)
Internal factors
Marketing
objectives;
mix strategy;
Costs;
Organizational
considerations
Pricing
decision

4. Type of Cost : （P.313)
Fixed cost
Variable
cost
Total
cost

5. Pricing in different types of markets
Monopolistic
competition
Pure competition
Pricing
Oligopolistic
competition
Pure monopoly

6. Demand curve (P.354) P1 P1 P2 price
Q2 Q Q Q1
A. Inelastic demand B. Elastic demand P2 P2
price

7. Price elasticity of demand (P.382)
%Change in Quantity Demanded
Price Elasticity =
of demand %Change in price

8. General pricing approaches (P.320)
Product
Costs
Competitors’ prices and other
Internal and external factors
Consumer
perceptions
of value
Price floor
No profits below
this price
Price ceiling
No demand above
this price

9. Cost -Based Pricing（成本导向定价）
Cost - plus pricing（成本加成定价）(P.320)
e.g:
Variable cost $10
Fixed cost $300,000
Expected unit sales ,000

10. (1-- Desired return on sales) 1--0.2
Fixed Costs
Unit cost = Variable Cost +
Unit Sales
300000
= $ = $16
50000
Unit Cost $16
Markup Price = = =$20
(1-- Desired return on sales)

11. Breakeven Volume Pricing (target profit pricing)（目标利润定价）(P.321)$
Total Revenue
Target Profit($20000)
Total Cost
600
400
Fixed Cost Q

12. Breakeven volume and profits at different prices
(1)
price
(2)
Unit demand
needed
(3)
Expected unit
demand
(4)
Total
Revenue
(1)*(3)
(5)
cost
(6)
Profit
(4)-(5)
$14 16 18 20 22
75000
50000
37500
30000
25000
71000
67000
60000
42000
23000
$994000
840000
506000
970000
900000
720000
530000
-$32000
102000
180000
120000
-24000

13. Value- Based Pricing （认知价值定价）(322) Cost based pricing
Product
Cost
Price
value
Customer
Customer
Value
Price
Cost
Product

14. Competition -Based Pricing（竞争导向定价）
BID PROFIT ASSUMED EXPECTED
PROFIT
$9, $ % $81 % % %
随行就市定价
密封投标定价
Sealed-bid
pricing
Going-rate
pricing

15. New-product Pricing Strategies (P.333)
Market-Skimming
Pricing
Market-Penetration
Pricing
1、High quality and
image，enough buyer；
2、Cost is not high for
smaller volume；
3、Competitors hardly
enter the market。
1、Market is high
price sensitive；
2、Cost is falling as
sales volume increase；
3、Low price can keep
out the competition。

16. Product-Mix Pricing Strategies
STRATEGY DESCRIPTION
Product line pricing Setting price steps between product
（系列定价） line items。
Optional-product pricing Pricing optional or accessory products
（附件定价） sold with the main product。
Captive-product pricing Pricing products that must be used
（诱饵定价） with the main product。
By-product pricing Pricing low-value by-products to get
（副产品定价） rid of them。
Product-bundle pricing Pricing bundles of products sold
（捆绑定价） together。

17. Price-Adjustment Strategies
STRATEGY DESCRIPTION
Discount and allowance
pricing
Segmented pricing
Psychological pricing
Promotional pricing
Value pricing
Geographical pricing
Reducing prices to reward customer
responses such as paying early or
promoting the product。
Adjust prices to allow for differences
in customer，products，or locations。
Adjust price for psychological effect。
Temporarily reducing prices to
increase short-run sales。
Adjust prices to offer the right
combination at a fair price。
Adjust prices to account for location。

18. Price Changes Initiating Price Cuts; Initiating Price Increases;
Buyer Reactions to Price Changes;
Competitor Reactions to Price Changes.

19. Assessing and responding to competition’s price changes ( P.347)
Hold current price;
Continue to monitor
Competitor’s price
Has competitor
cut price? No
Yes
Will low price
negatively affect out
market share & profit? No
Reduce price
Raise perceived
quality
Yes No
Can/should effective
action be taken?
Improve quality
& increase price
Yes
Launch low-price
“fighting brand”