Chapter 8: Pricing

Learning Objectives

  1. Students will understand the factors impacting the pricing decision.
  2. Students will be able to analyze the impact and perceptions of pricing from the viewpoints of cost, competition, and customers.
  3. Students will be able to articulate the goals of multiple pricing strategies and tactics.


From a customer’s point of view, value is the sole justification for price. Many times customers lack an understanding of the cost of materials and other costs that go into the making of a product. But those customers can understand what that product does for them in the way of providing value. It is on this basis that customers make decisions about the purchase of a product.

Effective pricing meets the needs of consumers and facilitates the exchange process. It requires that marketers understand that not all buyers want to pay the same price for products, just as they do not all want the same product, the same distribution outlets, or the same promotional messages. Therefore, in order to effectively price products, markets must distinguish among various market segments. The key to effective pricing is the same as the key to effective product, distribution, and promotion strategies. Marketers must understand buyers and price their products according to buyer needs if exchanges are to occur. However, one cannot overlook the fact that the price must be sufficient to support the plans of the organization, including satisfying shareholders. The price impacts the amount of product sold. Those two attributes, price and units, are the primary source of revenue for most businesses.

In this chapter, we will examine influences on pricing, pricing strategies, and pricing adjustments. Your challenge will be to leave your consumer mindset behind, and to examine this subject as a business executive.



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