Pricing

• Pricing plays a crucial role in marketing management.
• Consumer psychology and pricing factors influence how consumers perceive prices.
• A manager must consider several factors when setting prices.
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• Responding to competitive price cuts requires careful consideration.
• Designing and managing incentives is a crucial aspect of pricing.
• Negotiations between buyers and sellers can result in one price for all buyers.
• Internet pricing is a common pricing strategy.
• Reference prices and image pricing are two pricing strategies that consider consumer psychology and pricing factors.
• Six main steps are involved in setting the price: defining the pricing objective, determining demand, estimating costs, analyzing competitors’ costs, prices, and offers, selecting a pricing method, and setting the final price.
• Common pricing objectives include short-term profit, market penetration, market skimming, and quality leadership.
• Price elasticity of demand is a factor in determining demand.
• Fixed costs, variable costs, and total costs are factors in estimating costs.
• Experience curve effects and experience curve pricing are factors in estimating costs.
• A firm must take competitors’ costs, prices, and reactions into account when analyzing competitors’ prices.
• Markup pricing, target-return pricing, and economic value-to-customer pricing are pricing methods to consider.
• Competitive pricing is a pricing method where the firm bases its price largely on competitors’ prices.
• Auction pricing can be conducted in English (ascending), Dutch (descending), or Sealed-bid format.
• Price discrimination occurs when a company sells a product or service at two or more prices that do not reflect a proportional difference in costs.
• First degree price discrimination: Customer segment pricing, product form pricing, channel pricing, location pricing, and time pricing.
• Selecting Consumer Incentives involves Price reductions, Coupons, Cash refunds, Price packs, Premiums, Frequency programs, Prizes, Tie-in promotions, Seasonal discounts, and Financing.
• Initiating and Responding to Price Changes involves Initiating price cuts, Excess plant capacity, and Domination of market.
• Initiating and Responding to Price Changes also involves Initiating price increases, Cost inflation, and Rising costs unmatched by productivity gains squeeze profit margins and lead companies to regular rounds of price increases.
• Incentives as a Marketing Device can produce a high sales response in the short run but little permanent gain over the longer term, can prompt consumers to engage in stockpiling, and can devalue the company’s offering in buyers’ minds.
• Uber riders have become accustomed to surge pricing, knowing that following a concert or sporting event they may pay two or three times as much as usual for a ride.
• Airline companies could use an Uber pricing model.
• Selecting sales force incentives aims to encourage the sales force to support a new product or model, boosting prospecting and stimulating off-season sales.
• Major Incentive Decisions involve Establishing the objectives of incentives, Defining the size and approach for incentives, Determining size, Establishing conditions for participation, Decide on duration, Choosing a distribution vehicle, Establishing timing, and Setting total sales promotion budget.
• Responding to Price Changes involves Anticipating competitive responses and Responding to competitors’ price changes.
• Selecting trade incentives involves Allowances, Free goods, Price-off, Payment discount.
• Fast food restaurants usually offer a variety of “meal deals” comprising a sandwich, a side dish, and a drink.
• Managing Incentives involves Incentives, Sales promotion tools, mostly short-term, designed to stimulate quicker or greater purchase of particular products or services by consumers or the trade.
• Product Mix Pricing includes Loss-leader pricing, Optional feature pricing, Captive pricing, Two-part pricing, By-product pricing, and Product bundling pricing.
• Technology has changed pricing strategy by enabling surge pricing on Uber and peak pricing on airlines.