Building the Price Foundation and Arriving at the Final Price

While reading Chapter 13, I learned how to build the price foundation by the ratio of perceived benefits to price. Pricing has a direct effect on a firm's profits, which is determined by the profit equation, which is “Profit = Total Revenue – Total Cost”. That pricing objectives specify the role of price in a firm's marketing strategy and may include profit, sales revenue, market share, unit volume, survival, or some socially responsible price level. Pricing constraints that restrict a firm's pricing flexibility include demand, product newness, other products sold by the firm, production and marketing costs, cost of price changes, type of competitive market, and the prices of competitive substitutes. This was nice to read about, very fascinating.



While reading Chapter 14, I learned that demand, cost, profit, and competition influence the initial consideration of the approximate price level for a product of service. Demand-oriented pricing approaches stress consumer demand and revenue implications of pricing and include eight types, which are skimming, penetration, prestige, price lining, odd-even, target, bundle, and yield management. Cost-oriented pricing approaches emphasize the cost aspects of pricing and include three types, which are standard markup, cost-plus, and experience curve pricing. Profit-oriented pricing approaches focus on a balance between revenues and costs to set a price and include three types, which are target profit, target return-on-sales pricing, and target return-on-investment pricing. All of this was interesting to read, figuring out all these steps was nice to learn.




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