Week 9 notes - price Flashcards
Define Price
Value consumers exchange for the benefits of using or having a product or service.
What are the 3 main approaches to pricing?
Value , cost & competition competition based pricing.
Define value based pricing.
Price based on the customers perceived value of the good / service.
Method - assess value perception - price to match - determine costs - design product to meet price.
Variations - good value pricing / value added pricing.
Define cost based pricing
Sets price based on costs plus a fair rate of return for effort & risk.
Variations - Cost plus pricing, break even pricing.
Types of Costs
Fixed costs / overhead - do not vary with production or sales level - eg rent / internet / rates.
Variable costs - change with production volume - eg packaging, maintenance.
Total costs - sum of fixed & variable costs for any given level of production.
Define competition based pricing.
Price based on competitors strategies, costs, prices & market offerings.
Method - compare offerings, consider strength & strategy, consider competitive landscape.
Internal pricing considerations.
Marketing strategy, org objectives, marketing mix, who sets prices in the org.
External pricing consideration.
Nature of the market (pure comp, monop comp, oligopolistic comp, pure monop)
Aspects of demand (price demand relationship, big change = elastic)
Environmental factors, Economic climate, Gov, Resellers, Social concerns.
New market pricing strategy - market skimming
High initial price thats chnged through the life cycle skimming value from max # segments.
Conditions - value must support high price, small vol cost must not be prohibitive, little threat from new entrants.
New market strategy - market penetration
Low initial price to gain large amt of customers / market share.
Conditions - Low price must be able to generate a high demand, production costs must fall as sales increase, low price must bring share over long term.
