Chapter 10: Pricing and Business-to-Business Marketing Flashcards
Value based pricing
- based on customers perceived value
- difficult to establish
- creates prices consistent with marketing strategy
price (3)
- strategic element of marketing mix
- indication of value or worth of something
- without it, translations could not take place
cost based pricing (3)
determination of price by figuring cost offering a product or service and then adding on a standard percentage profit
- easy and often mistakenly used
- costs important in determining profit levels
- beyond this, cost has little to dow tih price
total offering
offering that provides a complete solution to the buyers needs. Product +service +delivery+preference, etc.
evaluated price
price of the offering, from the view of the customer, after all costs associated with the total offering are evaluated
evaluated price also includes alternative costs such as (3)
inventory/holding cost
disposal costs
storage cost
relevant cost (4 criteria)
resultant
realized
forward looking incremental
avoidable
value cost model
diagram of the customers value chain showing the key elements that contribute to value for the customers customer and the key way that the customer creates value.
resultant costs
costs that result from in-process decision.
ex: manufacturing, promotion
realized costs
actual costs incurred.
ex: office space, staff
forward looking costs
costs that will be incurred for the next unit or units of product or service sold when decision is implemented.
avoidable costs
costs that would not be incurred.
ex: if you want to reduce price of product need to calculate if that revenue will be enough to cover the costs
contribution margin
viewed as the difference between ongoing attributable costs and ongoing attributable costs and ongoing attributable revenue.
[(P-VC) X Q]- AC
ac: cost incurred by undertaking the action
demand curve
show swhat quanitty of products or services will be sold in the market at different price levels
supply curve
shows how much product will be produced in an industry at different levels of price
who reacts to changes in price
customers and competitors
elasticity
tendency of demand to react to changes in price
strategic purposes of pricing (4)
- hit level of profitability
- build good-will or relationships
- penetration of a new market or segment
- keep competitors out of an existing customer base
price skimming
charging relatively high prices that take advantage of early adapters strong desire for a product
- high perception
- inelastic
price penetration
charging relatively low prices to entice as many buyers as possible in the early market
- elastic
- economies of scale are necessary
learning curve
repetition leads to learning more efficient ways to complete the same task
managing price tactics (4)
bundling
discounts and allowances
competitive bidding
initiating price changes
bundling
several products or services are sold together as a package for one price
negotiation preparation
data collection and analysis
determination of negotiation strategy
negotiation info exchange
elicit info not yet obtained
test hypothesis about nature of situation
engage in negotiation process
opening discussion positions concessions closing obtain commitment
leverage
when a party has the power to get the other side to accede to the deal more than the other
integrative bargaining
an approach in which multiple dimensions are considered simultaneously
price concerns =
cost concerns
help customer save money through:
inventory management
vendor managed inventory
match high value concessions for high concessions. ex:
if customer wants low price, require higher purchase volume
scare tactics
veiled threats
real threats
