ABSTRACT
Accounts of price decision-making sometimes convey the impression that prices develop autonomously - independently of the remainder of the marketing programme - and that they act primarily as a constraint upon marketing planning and administration. The creative use of price as an instrument which communicates the company's customerorientated intentions and the establishment of price levels which both reflect buyers' willingness to pay and enhance the total marketing mix generally receive rather less attention. If prices are to perform these roles, however, they must be developed within the context of the policy and objectives of the business as well as within the planning framework of the firm's marketing programme. Oxenfeld 1 suggests a sequential price decision-making process which has been summarised in Table 6.1. Targeting markets is a procedure which derives from the firm's analysis of its opportunities and resources and which involves the
Table 6.1: Sequential Stages in the Price Decision Process
decision as to how differentiated its marketing programme will be. Even if the firm follows a concentrated marketing policy, focusing upon a single segment of a diverse generic market, it must develop pricing goals within the context of corporate and marketing strategy. Customers may be separated on the basis of price depending on their differential levels of price awareness and sensitivity and their attitudes towards prices, products and brands. The selection of a brand image for the market segments which have been targeted depends upon the criteria on which segmentation is based and the contribution that price
can make to a unified marketing programme. Oxenfeld suggests the following areas which may serve to distinguish buyers on the basis of their reactions to price:
- bargain susceptibility: sensitivity to price reductions - sensitivity to absolute price changes - habitual selection of a given price bracket and the strength of the
habitual behaviour - price awareness
need to reassure self about appropriateness of price: susceptibility to price comparisons knowledge of product prices generally factors associated strongly with price: product characteristics linked with various levels of price; attributes of marketer and product feelings about the fairness of prices charged expectations of future price movements
- perceptions of price differentials pleasure gained from paying particular prices fear of overpaying confidence in judging value and quality preference for credit payments vis-a-vis cash purchase.
