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

> Major pricing strategies

*Considerations in setting price [Figure 9.1], [Figure 9.2]
-Customer perceptions of value = Price ceiling (No demand above this price)
Assess customer needs and value perceptions -> set target price to match customer perceived value -> determine costs that can be incurred -> design product to deliver desired value at target price
-Product costs = Price floor (No profits below this price)
Design a good product -> determine product costs -> set price based on cost -> convince buyers of product’s value

1. Customer value-based pricing: setting the price based on buyers’ perception of value, rather than on the seller’s cost.
a. Good value pricing: offering just the right combination of quality and good service that customers want at a fair price. E.g. Mcdonald’s offer value meals and dollar menu items. Small and less expensive models in Armani car companies.
b. Value-added pricing: rather than cutting prices to match competitors, marketers adopting this strategy attach value-added features and services to differentiate their offerings and this supports higher prices.

2. Cost-based pricing: setting prices based on the costs for producing, distributing and selling the product, plus a fair rate of return for its effort and risk. E.g. Woolworth, Dell (lower costs can set lower prices that result in smaller margins but greater sales and profits)
a. Types of costs: a company’s costs take two forms, fixed and variable. -Fixed costs (or overhead): costs that do not vary with production or sales level. -Variable costs: costs that vary directly with the level of production. -Total costs: the sum of the fixed and variable costs for any given level