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MARKETING

MANAGEMENT

SESSION
FOUR (a)

PRICE
CONTEXT &
CONCEPTS

Session Objectives
Define the meaning of price.
Understand the different roles price can play for buyers
and sellers and in different kinds of markets.
Appreciate the nature of the external factors that influence
pricing decisions.
Explore the internal and organisational forces that
influence pricing decisions.
Understand the impact of the single European market and
the euro on pricing.

Factors Influencing Customers Price Assessments

Functional

Quality
Price
assessment

Financial

Operational
Personal

External Influences on Pricing Decision

Demand/
elasticity

Customers

Pricing
decision

Legal/
regulatory

Competitors
Channels
of distribution

The Classic Demand Curve

The Boomerang Demand Curve

The Parallel Demand Curve

Price Elasticity Defined


Price elasticity is the responsiveness of demand
to changes in prices.

Elastic products are very responsive, so that a price


increase leads to a fall in demand, while inelastic
products are very unresponsive and thus a rise in
price leads to little or no change in demand.

The Elastic Demand Curve

The Inelastic Demand Curve

Factors Influencing Price Sensitivity

Unique value effect

End benefit effect

Substitute awareness effect

Shared cost effect

Difficult comparison effect

Sunk investment effect

Total expenditure effect

Price-quality & inventory effect

Factors Influencing Price Sensitivity in B2B Markets

Total expenditure effect

End customer sensitivity

Penalty for failure effect

Sunk investment effect

Overall saving effect

Buyers ability to absorb costs

Contribution to quality effect

Buyers ignorance effect

Degree of customisation effect

Decision makers motivation effect

Competitors

Monopoly
Oligopoly
Monopolistic
competition
Perfect competition

Internal Influences on Pricing Decision

Pricing
decision

Marketing
objectives

Organisational
objectives

Costs

Session 4 (a): Key Terms

A _____

is a price which is distinctly higher than


average to reflect better product quality, exclusivity or
status.

_____

is a medium of exchange.

Session 4 (a) Key Terms

_____

use price as a means of comparing two or more


products in order to judge their likely quality or value.

Any

difference in the prices charged for the same


product to different market segments or in different
geographic regions is known as a _____.

Session 4 (a): Key Terms

The

responsiveness of demand to changes in prices is


known as the _____.

The

term _____ refers to bargaining between a buyer


and a seller to agree a mutually acceptable price.

Session 4 (a): Key Terms

_____

is a customer's judgment of a price in terms of


whether it is thought to be too high, about right or
extremely good value for money.

The

extent to which price is an important criterion in the


customer's decision- making process refers to _____.

Session 4 (a): Key Terms

_____

is a customer's assessment of the worth of what


they are getting in terms of a product's functional or
psychological benefits.

_____

is the analysis of products and processes to see


where the greatest costs are being incurred and where
the greatest value is added.