pricing concepts for establishing value Flashcards
company objectives
profit oriented
sales oriented
competitor oriented
customer oriented
profit orientation
price determined on maximum profit
sales orientation
focus on increasing sales, long term market share
iTunes
competitor orientation
use of price as a competitive tool
create a barrier to entry
shake up traditional industry
Uber
customer orientation
focus is on customer expectation and matching prices to them
add-ons for budget airlines
5 Cs of pricing
competition company objectives costs customers channel members
customers
how customers react impacts pricing approach
knowing a demand curve helps see relationships
costs
set the floor price fixed costs variable costs total costs scale and experience effects break-even analysis
Contribution per unit
price - variable cost per unit
breakeven point =
fixed costs/contributions per unit
competition
pure competition
monopolistic competition
oligopoly
pure monopoly
channel members
must consider reseller profit margins
manufacturers, wholesalers and retailers can have different perspectives on pricing
consider international prices, grey market areas
ebay
the internet
easily research prices
more price sensitive
broadened scope of competition
showrooming
economic factors
cross shopping
inflation and interest rates
3 main methods to set prices
cost based
competitor based
value based
cost based pricing
determine final price by starting with cost ignores demand and comp sellers certain about costs minimise price competition perceived fairness
competition based pricing
set prices relative to competition
may signal quality or positioning
value based pricing
improvement value method - estimates the improvement value of the product relative
cost of ownership method - may be willing to pay more if overtime it costs less to own
new product pricing strategies
market skimming
market penetration
price tactics aimed at consumers
markdowns quantity discounts seasonal discounts coupons rebates leasing price bundling leader pricing price lining
B2B pricing tactics
seasonal discounts cash discounts allowances quantity discounts uniform delivered versus zone prices
