Marketing Management Chapter 10: Pricing Decisions


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Chapter 10: Summary

Much of pricing theory is derived from economics, especially from supply and demand theory. This information is encapsulated in the famous demand and supply curves. The price is set by the point where the curves intersect. The degree to which demand is susceptible to price changes (price elasticity of demand) is another concept borrowed from economics but very useful to marketers.

Again in theory, but rarely in practice, these curves can be obtained from statistical analysis of historical data, survey research, and experimentation. Rather less theoretically, factors affecting the pricing policies of a specific organization include organization factors, product life cycle, product portfolio, product line pricing, segmentation and positioning, and branding. Factors derived from customers are demand, benefits, value, and distribution channels. Of these, perceived value is especially important because it defines what the customer should be prepared to pay.

Pricing new products offers a different set of challenges. In general, the two main opposing strategies are

•     Skimming—High price, to skim off the short-term profit

•     Penetration—Low price, to maximize long-term market share

Practical pricing policies for existing brands may include cost-plus pricing, target pricing, historical pricing, product line pricing, competitive pricing, market-based pricing, and selective pricing. The price can also be a major factor in determining a product’s or service’s image, ranging from quality-price to budget-price.

A wide range of discounts may be offered: trade, quantity, cash, allowances, seasonal, promotional, and individual.

Prices may also be set at levels that are judged to be “psychologically” appropriate ($9.95, for instance). Other ways of achieving a price effect may lie with other parts of the offer, such as product bundling, at one extreme, and charging separately for “options,” at the other. Alternatively, price may be negotiated, as it often is in capital goods markets.

Organizations may resort to price competition for several reasons, including volume sales, other stimuli, and minor brands. On the other hand, the dangers of initiating a price war include low-quality image, temporary advantage, and profit loss.

10 startling facts about global wealth inequality

1. On Monday, Oxfam published a startling report showing that the richest 85 people in the world are worth more than the poorest 3.5 billion.wealth pyramid

2. The numbers Oxfam is using come from Credit Suisse’s 2013 Global Wealth Report. There are a lot of amazing numbers in that report.

3. For instance, Switzerland leads in average wealth, with each adult worth, on average, $513,000. Australia is in second place, at $403,000. The U.S. is in the $250,000-300,000 range.

4. But that’s average wealth — which is to say, that number spikes if Bill Gates moves into your country. Median wealth is a more interesting measure. There, Australia leads with $220,000. They’re followed by Luxembourg, Belgium, France, Italy, the UK, and Japan. The U.S. falls way back on this measure, with a median wealth of just $45,000.

5. Think about that for a minute: Most Americans are worth less than most Italians, Belgians and Japanese.

6. Some researchers think Credit Suisse overestimates median wealth in the U.S. Other estimates put us in 27th place.

7. The tremendous difference between average wealth and median wealth is the country’s level of wealth inequality at work.

8. Global wealth inequality is even more startling, of course. After accounting for debts, assets of more than $4,000 put a person in the wealthiest half of world citizens. Assets of more than $75,000 put them in the top 10 percent. Assets of more than $753,000 put them in the top 1 percent.

9. This leads to the most startling figure in the report: “Our estimates suggest that the lower half of the global population possesses barely 1% of global wealth, while the richest 10% of adults own 86% of all wealth, and the top 1% account for 46% of the total. “

10. There’s a lot of turnover amidst the world’s top billionaires. Of the 100 top billionaires in 2001, only 37 remained on the list in 2013.

by Ez

10 Best Countries to do Business

Ever wonder where the best places to do business are? The top ten are provided below based on 2011 proxy statements.

Rank Name GDP Growth (%) GDP/Capita ($) Trade Balance as % of GDP Population (mil)


3.1 39,400 -3.1 34.0

New Zealand

1.5 27,700 -2.3 4.3

Hong Kong

6.8 45,900 6.6 7.1


-1.0 37,300 -0.7 4.7


2.1 36,600 5.5 5.5


14.5 62,100 20.8 4.7


5.5 39,100 6.3 9.1


0.4 54,600 12.9 4.7

United Kingdom

1.3 34,800 -2.5 62.7

United States

2.8 47,200 -3.2 313.2


See more here.