Pricing Concepts

The two-day seminar for the marketing managers, customer service employees, field service people and so on

Why this training is important?

Price means one thing to the consumer and something else to the seller. To the consumer it is the cost of something. To the seller, price is revenue, the primary source of profits. In the broadest sense, price allocates resources in a free-market economy. With so many ways of looking at price, it is no wonder that marketing managers find the task of setting prices a challenge.

What is price? Price is that which is given up in an exchange to acquire for the good or service. It may also be time lost while waiting to acquire the good or service.

Consumers are interested in obtaining a “reasonable price”. “Reasonable price” really means “perceived reasonable value” at the time of the transaction.

Price also can relate to anything with perceived value, not just money.

Price plays the important role to marketing managers. Prices are the key to profits for an organization. Revenue is the price charged to customer multiplied by the number of units sold. Revenue is what pays for every activity of the company: production, finance, sales, distribution, and so on. What’s left over is profit. Managers usually strive to charge a price that will earn a fair profit.

To earn the profit, managers must choose a price that is not too high or too low, a price that equals the perceived value to target consumers. If a price is set too high in consumers’ minds, the perceived value will be less than the cost, and sale opportunities will be lost. Pricing a new product too high may give an incentive to some shoppers to go to a “preowned” or consignment retailer.

Lost sales mean lost revenue. Conversely, if a price is too low, it may be perceived as a great value for the customer, but the firm loses revenue it could have earned. Setting prices too low may not even attract as many buyers as managers might think.

Trying to set the right price is one of the most stressful and pressure-filled tasks of the marketing manager, as trend in the consumer market attest:

1. Confronting a flood of new products, potential buyers carefully evaluate the price of each one against the value of existing products.
2. The increased availability of bargain-priced private and generic brands has put downward pressure on overall prices.
3. Many firms are trying to maintain or regain their market share by cutting prices.

To survive in today’s highly competitive marketplace, companies need pricing objectives that are specific, attainable, and measurable. Realistic pricing goals then require periodic monitoring to determine the effectiveness of the company’s strategy. For convenience pricing strategy can be divided into three categories: profit oriented, sales oriented, and status quo.

After completing this training, you will be able to:

1. Realize the importance of pricing decisions to the economy and to the individual firm.
2. List and explain a variety of pricing objectives.
3. Take into consideration the role of demand in price determination.
4. Develop the concept of yield management systems.
5. Develop cost-oriented pricing strategies.
6. Know how the product life cycle, competition, distribution, the Internet and extranets, promotions, demands of large customers, and perceptions of quality can affect price.
7. Use the procedure for setting the right price.
8. Identify the legal and ethnical constraints in pricing decisions.
9. Know how discounts, geographic pricing, and other special pricing tactics can be used to fine-tune the base price.

Who should listen this course:

The present training is designed for the marketing managers, customer service employees, field service people and so on.

Schedule of the training:

First day
Introduction, trainer, materials of the course, participants:		9:00
Topic I:	The importance of price What is price? The importance of price to marketing managers.	9:20
Coffee break:		11:00
Topic II:	Pricing objectives Profit-oriented pricing objectives. Sales-oriented pricing objectives. Status quo pricing objectives.	11:20
Lunch:		13:00
Topic III:	The demand determinant of price The nature of demand. Elasticity of demand. The power of yield management system.	14:00
Coffee break:		15:30
Topic IV:	The cost determinant of price Markup pricing. Break-even pricing.	16:00
Completion of the day. Summing up		17:30
Second day
Topic V:	Others determinant of pricing Stages of the product life cycle. The competition. Distribution strategy. Demands of large customers. The relationship of price to quality.	9:00
Coffee break:		11:00
Topic VI:	How to set a price on a product Establish pricing goals. Estimate demand, costs, and profits. Choose a price strategy. “Zero percents” of overhead expenses. Effect of “Titanic”. How to avoid it?	11:20
Lunch:		13:00
Topic VII:	The legality and ethics of price strategy Unfair trade practices. Price fixing. Price discrimination. Predatory pricing.	14:00
Coffee break:		15:30
Topic VIII:	Tactics for fine-turning the base price Discounts, allowances, rebates, and value pricing. Value-based pricing. Geographic pricing. Special pricing tactics. Consumer penalties.	16:00
Completion of the day. Summing up		17:30

During the training distributing materials will be granted (questionnaire, booklets, practical recommendations), the role games, tests will be conducted, audio records will be listened, exercises will be performed.