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Internal Factors
• Costs
– Set the floor for the price a company can charge for its product
• Cover the cost for producing, distributing, promoting the product
©2006 Pearson Education, Inc. Upper Saddle River, NJ 07458
MarketinMgafrokreHtinogspfiotralHityosapnidtalTiotyurainsdmT, o4uthriesmdi,ti4otnh edition KKoottlleerr,,BBoowweenn,,aannddMMaakkeennss
©2006 Pearson Education, Inc. Upper Saddle River, NJ 07458
MarketinMgafrokreHtinogspotyurainsdmT, o4uthriesmdi,ti4otnh edition KKoottlleerr,,BBoowweenn,,aannddMMaakkeennss
Internal Factors
• Marketing Objectives
– Survival – Current Profit Maximization
• Choose the price that will produce the maximum current profit
– Market-Share Leadership
• Charging too much chases away potential customers, charging too little cuts revenue that hardly maintain operations properly
©2006 Pearson Education, Inc. Upper Saddle River, NJ 07458
MarketinMgafrokreHtinogspfiotralHityosapnidtalTiotyurainsdmT, o4uthriesmdi,ti4otnh edition KKoottlleerr,,BBoowweenn,,aannddMMaakkeennss
Factors to Consider when Setting Prices
• Understanding how to apply pricing strategies for existing products
©2006 Pearson Education, Inc. Upper Saddle River, NJ 07458
MarketinMgafrokreHtinogspfiotralHityosapnidtalTiotyurainsdmT, o4uthriesmdi,ti4otnh edition KKoottlleerr,,BBoowweenn,,aannddMMaakkeennss
©2006 Pearson Education, Inc. Upper Saddle River, NJ 07458
Chapter 12
Pricing Products:
Pricing Considerations,
Approaches, and Strategy
Marketing for Hospitality and Tourism, 4th edition Kotler, Bowen, and Makens
– Companies with lower costs can set lower prices that result in greater market share
– If costs>competitors to produce and sell its product, either charge a higher price or make less profit
External Factors
• Market and Demand
– Costs set the lower limits of prices, the market & demand set the upper limit
– Marketers must understand the relationship b/w price & demand for a product
External factors
• Competitors’ prices and offers
– Check the price, quality, features of competitive hotels
– Once aware of competitors’ prices, use this as starting point for your own price decision
• Elastic demand: demand changes greatly with small change in price (e.g. price increase leads to a large drop in demand)
– sellers can consider lower their prices which will produce more total revenue
©2006 Pearson Education, Inc. Upper Saddle River, NJ 07458
MarketinMgafrokreHtinogspfiotralHityosapnidtalTiotyurainsdmT, o4uthriesmdi,ti4otnh edition KKoottlleerr,,BBoowweenn,,aannddMMaakkeennss
Chapter Objectives
• Outline the internal and external factors affecting pricing decisions
• Contrast the differences in general pricing approaches
• Identify the new product pricing strategies of market-skimming pricing and marketpenetration pricing
MarketinMgafrokreHtinogspfiotralHityosapnidtalTiotyurainsdmT, o4uthriesmdi,ti4otnh edition KKoottlleerr,,BBoowweenn,,aannddMMaakkeennss
Internal Factors
Price
• Price is the amount of money charged for a good or service
– E.g. airlines charge you a fare, hotels charge room rate, tuition for education
• The only marketing mix element that produces revenue
©2006 Pearson Education, Inc. Upper Saddle River, NJ 07458
MarketinMgafrokreHtinogspfiotralHityosapnidtalTiotyurainsdmT, o4uthriesmdi,ti4otnh edition KKoottlleerr,,BBoowweenn,,aannddMMaakkeennss
General Pricing Approaches
“The real issue is value, not price.”
-Robert T. Lindgren
©2006 Pearson Education, Inc. Upper Saddle River, NJ 07458
MarketinMgafrokreHtinogspfiotralHityosapnidtalTiotyurainsdmT, o4uthriesmdi,ti4otnh edition KKoottlleerr,,BBoowweenn,,aannddMMaakkeennss
• Organizational Considerations
©2006 Pearson Education, Inc. Upper Saddle River, NJ 07458
MarketinMgafrokreHtinogspfiotralHityosapnidtalTiotyurainsdmT, o4uthriesmdi,ti4otnh edition KKoottlleerr,,BBoowweenn,,aannddMMaakkeennss
©2006 Pearson Education, Inc. Upper Saddle River, NJ 07458
MarketinMgafrokreHtinogspfiotralHityosapnidtalTiotyurainsdmT, o4uthriesmdi,ti4otnh edition KKoottlleerr,,BBoowweenn,,aannddMMaakkeennss
• Marketing Mix Strategy
– Price must be coordinated with product design, distribution, promotion decisions to form a consistent & effective marketing program