Pricingاحمدرضا رأفتی رودسری

431092100

Topics

1) Elements of Pricing

2) Approaches

3) What a Price should do

4) Terminology

5) Nine laws of price sensitivity and consumer psychology

6) Methods

1

Should

prices

change

in

various

geographical

areas,

referred

to

as

?

How important are customer price sensitivity (e.g. "sticker shock") and elasticity issues?

How much to charge for a product or service? This question is a typical starting point for discussions about pricing,

however, a better question for a vendor to ask is

“How much do customers value the products, services, and other intangibles that the vendor provides.“

Do price points already exist for the product category?

The price floor is determined by production factors like costs (often

only variable costs are taken into account), economies of scale,

marginal cost, and degree of operating leverage

Are there transfer pricing considerations?

How visible should the price be? - Should the price be neutral? (i.e.: not an important differentiating factor),

should it be highly visible? (to help promote a low priced economy product, or to reinforce the prestige image of a quality

product),

or should it be hidden? (so as to allow marketers to generate interest in the product unhindered by price considerations).

Are there joint product pricing considerations?

What sort of payments should be accepted? (cash, check, credit card, barter)

2

3 Levels of approaching to Pricing

• The overall economics of the industry, including supplier price changes and customer demand changes

Industry

• The competitive position of the pricein comparison to the value differential of the product to that of comparative competing products

Market

• Managing the implementation of discounts away from the reference, or list price, which occur both on and off the invoice or receipt

Transaction

3

Achieve the financial GOALS of the company (i.e. profitability)

Fit the REALITIES of the marketplace (Will customers buy at that price?)

Support a product's Positioning and be consistent with the other variables in

the Marketing Mix

A low cost price can be a for product quality,

effective promotions, or an energetic selling effort by distributors

4

Price is influenced by the type of used,

the type of used,

and the of the product

Price will usually need to be relatively high

if Distribution is expensive,

The product is supported by extensive advertising and

Manufacturing is exclusive

Terminology 5Loss Leader

Multidimensional

Pricing

Price/Quality

Relationship

Premium

pricing

Price Skimming,

Price Discrimination

Yield Management,

Price Points,

Psychological Pricing,

Bundle Pricing,

Penetration Pricing,

Price Lining,

Value-based Pricing,

Geo Pricing

and

Premium Pricing.

Demand-based

Pricing

“The Strategy and Tactics of Pricing” Book, Thomas Nagle and Reed Holden

1. Reference price effect

2. Difficult comparison effect

3. Switching costs effect

4. Price-quality effect

5. Expenditure effect

6. End-benefit effect

7. Shared-cost effect

8. Fairness effect

9. Framing effect

Price Sensivity ByThe product’s price relative to perceived alternatives is higher…

When they don’t have difficulty comparing it to potential alternatives…

The product-specific investment a buyer must make to switch suppliers is little…

Higher prices don’t signal higher quality…

The expense accounts for a large percentage of buyers’ available income or budget…

The effect refers to the relationship a given purchase has to a larger overall benefit

The bigger the portion of the purchase price buyers must pay for themselves…

The price not what they perceive as “fair” or “reasonable” given the purchase context…

when they perceive the price as a loss rather than a forgone gainwhen the price is paid separately rather than as part of a bundle.

6

Solutions for reducing sensivity or Elasticity

Good comparison with

alternatives

Information Ambiguity

Loyalty ProgramsAppropriateness

of Q & P

Good Customer Targeting

Honesty Uniqueness

7

81. Cost the limit of price

2. Group buy

3. Options pricing

4. Pay what you want

5. Price elasticity of demand

6. Price system

7. Price umbrella

8. Product life cycle management

9. Product sabotage

10. Psychological pricing

11. Purchasing power

12. Suggested retail price

13. Target pricing

14. Time-based pricing

15. Value pricing

Marketing Matrix

E. Jerome McCarthy

FourP&…Seven P

Product

Place

(Distribution)

Promotion

ProcessPeople

Physical evidence

Price

9