Providing Value to Customers

Read these sections to get another perspective on marketing and the marketing mix. Complete the exercises at the end of the sections.

With a new product, a company might consider the skimming approach – starting off with the highest price that keenly interested customers are willing to pay. This approach yields early profits but invites competition.
Using a penetration approach, marketers begin by charging a low price, both to keep out competition and to grab as much market share as possible.
Several strategies work for existing as well as new products.
With cost-based pricing, a company determines the cost of making a product and then sets a price by adding a profit to the cost.
With demand-based pricing, marketers set the price that they think consumers will pay. Using target costing, they figure out how much consumers are willing to pay and then subtract a reasonable profit from this price to determine the amount that can be spent to make the product.
Companies use prestige pricing to capitalize on the common association of high price and quality, setting an artificially high price to substantiate the impression of high quality.
Finally, with odd-even pricing, companies set prices at such figures as $9.99 (an odd amount), counting on the common impression that it sounds cheaper than $10 (an even amount).