Chapter 15,Designing Pricing Strategies and Programs,Objectives,Setting the Price Adapting the Price Initiating & Responding to Price Changes,Price High Medium Low,High,Low,Product Quality,Med,Overcharging,Rip-Off,False Economy,Price - Quality Strategies,Setting Pricing Policy,Types of Costs,Total Costs Sum of the Fixed and Variable Costs for a Given Level of Production,Fixed Costs (Overhead) Costs that dont vary with sales or production levels. Executive Salaries Rent,Variable Costs Costs that do vary directly with the level of production. Raw materials,The Three Cs Model for Price Setting,Pricing Methods,Markup Pricing Target Return Pricing Perceived Value Pricing Value Pricing Going-Rate Pricing Sealed-Bid Pricing,Some important pricing definitions,Utility: The attribute that makes it capable of want satisfaction Value: The worth in terms of other products Price: The monetary medium of exchange.,Value Example: Caterpillar Tractor is $100,000 vs. Market $90,000 $90,000 if equal 7,000 extra durable 6,000 reliability 5,000 service 2,000 warranty $110,000 in benefits - $10,000 discount!,Promotional Pricing,Loss-leader pricing Special-event pricing Cash rebates Low-interest financing Longer payment terms Warranties & service contracts Psychological discounting,Psychological Pricing,Discriminatory Pricing,Price-Reaction Program for Meeting a Competitors Price Cut,Has competitor cut his price?,By more than 4% Drop price to competitors price,By 2-4% Drop price by half of the competitors price cut,By less than 2% Include a cents-off coupon for the next purchase,