Setting Price

In the Pricing Decisions Tutorial we provided the foundation marketers use to make pricing decisions.  In this part of the Principles of Marketing Tutorials we look at the process marketers follow when setting product prices.  This coverage includes examination of: approaches to setting an initial price; different price adjustments marketers make before settling on a final selling price; payment options; and additional issues that affect pricing.

The central point of this tutorial is a five-step process for setting price.  We want to emphasize that while the process serves as a useful guide for making price decisions, not all marketers follow this step-by-step approach.  As we will see many marketers may choose to bypass Steps 3 and 4 altogether.  Additionally it is important to understand that finding the right price is often a trial-and-error exercise where continual testing is needed. 

Like all other marketing decisions, market research is critical to determining the optimal selling price.  Consequently, the process laid out here is intended to open the marketer’s eyes to the options to consider when setting price and is in no way presented as a guide for setting the “perfect” price.