EBK PRINCIPLES OF MARKETING
EBK PRINCIPLES OF MARKETING
16th Edition
ISBN: 9780133850697
Author: Kotler
Publisher: VST
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Chapter 10, Problem 10.1DQ
Summary Introduction

To discuss: The ways in which value based pricing differ from cost based pricing.

Cost-based pricing includes setting prices dependent on the expenses of creating, dispensing and selling the product in addition to a reasonable rate of return for the organization's exertion and risk. An organization's costs might be a significant component in its pricing strategy.

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Explanation of Solution

The ways in which value based pricing differ from cost based pricing are as follows:

Customer value based pricing utilizes purchasers' view of significant worth as the reason for establishing price. A larger pricing starts with a total comprehension of the value that an item or service makes for customers and setting a price that catches that value. Customer view of the item's value establishes the ceiling at costs. If the customers see that an item's cost is more prominent than its value, they won't purchase the product.

Cost-based pricing includes establishing costs dependent on the expenses for delivering, circulating, and selling products in addition to a reasonable rate of return for exertion and risk. Organization and item expenses are a significant thought in establishing prices. While customer value observations set the price ceiling, costs set the floor for evaluating. But, cost-based pricing is product determined instead of customer driven.

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