276
Critical
Thinking
Key
Terms Objectives
Web
Connect
After completing this section, you will be able to:
Define price as it applies to the four Ps of
marketing.
Describe factors that impact pricing
decisions.
Explain the importance of establishing pricing
objectives.
Describe the different pricing strategies.
Give examples of different pricing techniques.
Identify technology that can be used to set
prices.
SECTION 10.2
Price
value
list price
selling price
manufacturer’s
suggested retail
price (MSRP)
profit margin
market share
return on sales (ROS)
return on investment
(ROI)
cost-based pricing
markup
keystone pricing
demand-based
pricing
competition-based
pricing
psychological pricing
Once you have established your products
or services, you will set the sales prices.
Use the Internet to research how products
similar to yours are priced. What did you
learn about the pricing process?
To be competitive, you may offer discounts
or different pricing options for customers.
Research the companies that will compete
with your business. What pricing models do
they use?
What Is Price?
Price is the amount of money requested or exchanged for a
product. It is also one of the four Ps of marketing. Correctly pricing
goods and services is a challenge for every business. There are three
important parts to determining a correct price. The price:
• must cover the costs of producing and selling the product;
• should provide the desired level of profit for the business; and
• must be what customers are willing to pay for the product.
Some customers base purchases on product price alone.
Value is another important factor in pricing. Value is the relative
worth of something to a person. Some business owners use price to
establish and communicate the value of a product in the customer’s
mind. Customers may be willing to pay more if they believe in the value
of the product or service. A product’s value proposition or unique selling
proposition explains the value of the product over others that are similar.
A small business
may be able to
charge higher prices
because of excellent,
personalized service
to its customers. That
service is the business’
value proposition
or unique selling
proposition.
FYI