Introduction

Ml products and services have a priee just as they have a value. Many non-profit and all profit-making organizations must also set prices, be they the predatory price of The Times, the price of access to see the island where Lady Diana lies, or the price of World Cup tickets for those who cannot get them officially. Pricing is controversial and goes by many names:

Price is all around us. You pay rent for your apartment, tuition for your education and a/ee to your physician or dentist. The airline, railway, taxi and bus companies charge you a/are; the local utilities call their price a rate; and the local bank charges you interest for the money you borrow ,.. The guest lecturer charges an honorarium to tell you about a government official who took a bribe to help a shady character steal dues collected by a trade association. Clubs or societies to which you belong may make a special assessment to pay unusual expenses. Your regular lawyer may ask for a retainer to cover her services. The 'priee' of an executive is a salary, the priee of a salesperson may be a commission and the price of a worker is a wage. Finally, although economists would disagree, many of us feel that income taxes are the price we pay for the privilege of making money.2

In the narrowest sense, priee is the amount of money charged for a product or service. More broadly, price is the sum of all the values that consumers exchange for the benefits of having or using the product or service.

How are prices set? Historically, prices were usually set by buyers and sellers bargaining with each other. Sellers would ask for a higher price than they expected to get and buyers would offer less than they expected to pay. Through bargaining, they would arrive at an acceptable price. Individual buyers paid different prices for the same products, depending on their needs and bargaining skills.

price

The amount of money charged for a product or seivice, or the sum of the values that consumers exchange for the benefits of having or using the product or service.

Figure 1.6.1

Factors affecting price decisions

Today, most sellers set one price for all buyers. Large-scale retailing ltd to the idea at the end of the nineteenth century. F.W, Wbolworth and other retailers advertised a 'strictly one-price policy' because they carried so many items and had so many employees.

Historically, price has been the most significant factor affecting buyer choice, This is still true in poorer nations, among poorer groups and with commodity products. However, non-price factors have become more important in buyer-choice behaviour in recent decades.

Price is the only element in the marketing mix that produces revenue; all other elements represent costs. Price is also one of the most flexibly elements of the marketing mix. Unlike product features and channel commitments, price can be changed quickly. At the same time, pricing and price competition is the no. 1 problem facing many marketing executives. Yet many companies do not handle pricing well. The most common mistakes are: pricing that is coo cost-oriented; prices that are not revised often enough to reflect market changes; pricing that does not take the rest of the marketing mix into account; and prices that are not varied enough for different products, market segments and purchase occasions.

In this and the next chapter, we focus on the problem of setting prices. This chapter looks at the factors that marketers must consider when setting prices and at general pricing approaches. In the next chapter, we examine pricing strategies for new-product pricing, product mix pricing, price changes and price adjustments for buyer and situations! factors.

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