#9 Pricing Flashcards
Factors Affecting Pricing
Internal
* Marketing objectives
* Marketing mix strategy
* Cost
* Organisational considerations
External Factors
* Level of demand and market type
* Competitor’s prices and offers
* Other external factors
Marketing Objectives
-
Survival
Profit maximisation
Market share maximisation
Product quality leadership
Block market share penetration
Stabilise market
Maintain loyalty of resellers
Prevent government intervention
Promote other product line
Marketing mix strategy
Compatibility with other marketing mix variables
Cost
Recovery of investment to maintain viability and continuity of business.
Organisational considerations
Make-up of organisational and level of authority of key players.
Level of demand and market type
- Pure competition
Oligopolistic competition
Monopolistic competition
Pure monopoly
Elastic demand
Inelastic demand
Competitor’s prices and offers
Market conditions
Other External Factors
Economic conditions
Regulations
Obsolescence
Pricing Approaches
Cost-based Pricing
* Cost Plus Pricing
* Break-Even Analysis or Target Profit Pricing
Value-based Pricing
* Good -value Pricing
* Value-Added pricing
Competition-based pricing
* Going-rate pricing
* Sealed-bid pricing
Cost Plus Pricing
adding a standard markup to the cost of the product
simplest pricing method
most popular
* sellers are more certain about the costs than demand
minimises price competition
perceived fairness to both seller and buyer
Break-Even Analysis or Target Profit Pricing
Price derive from computation from break-even analysis.
Total Revenue = Total Cost
Good -value Pricing
offer just the right combination of quality and good service at a fair price
applied to the introduction of less expensive versions or repackaging of existing established product to give a perceived offer of better value –value meals
another approach is to adopt the EDLP (every day low price) approach – hypermarts such as Wal-Mart, Carrefour, Giants
Value-Added pricing
attach value-added features and services to differentiate a marketing offer and
support higher price, rather than cutting prices to match competitors.
Going-rate pricing
based on competitors’ prices without considering own costs or to demand.
the prices set by the leaders - often the more dominant players.
Smaller firms follow closely but with a small marginal price difference
most prevalent in an oligopolistic market structure
Sealed-bid pricing
set by bidding under an open-tender system
based on the competitors’ anticipated prices instead of its own costs or on the demand
