SMM 5

• Price


  • The amount of money charged for a product or service
  • The sum of the values that customers exchange for the benefits of having or using the product or service

  
• Pricing objectives


  • Survival
  • Profit
  • Market share through differentiation
  • Maximizing sales
  • Market skimming
  • Maintaining the status-quo (the current state)
  • Ethical behavior

  
• Subscription pricing models


  • Fixed / flat-rate pricing model (EUR 19 per month all inclusive)
  • Tiered pricing model
  • Per unit/user model
• How companies can influence markets using price


  • Encouraging or limiting demand
  • Brand positioning (repositioning)
  • Setting entry barriers (low prices)
  • Attempting to eliminate competition (predatory pricing)
• Forms of price


  • Price
  • Rent
  • Tuition fee
  • Service fee
  • Rate
  • Toll
  • Wage
  • Salary
  • Commission
  • Fare
  • Tax
• Price elements


  • Cost price
  • Profit
  • Taxes (VAT, corporate tax)
  • Insurance
  • Discounts
• Factors influencing pricing


  • Internal factors - marketing objectives, marketing mix strategy, costs, organizational issues (transfer pricing), product quality
  • External factors - demand, price elasticity, competitors' prices, legislation, economic conditions

  
• Psychological pricing


  Consumers tend to perceive "odd prices" as being significantly lower than they actually are, tending to round to the next lowest monetary unit
• Price points


  Prices at which demand for a given product is supposed to stay relatively high

  
• Pricing approaches


  • Cost-based pricing
  • Break-even analysis and target profit pricing
  • Value-based pricing
  • Competition-based pricing
• Cost-based pricing


  Setting prices based on the costs for producing, distributing, and selling the product plus a fair rate of return for effort and risk

  
• Experience curve (learning curve)


  The drop in the average per-unit production cost that comes with accumulated production experience
• Break-even pricing (target return pricing)


  Setting price to break even on the costs of making and marketing a product or setting price to make a target return
• Value based pricing


  Customer-value-based pricing - Setting price based on buyers' perceptions of value rather than on the seller's cost

  
• Value based pricing approaches


  • Single segment
  • Comparison with next best alternative
  • Differentiation

  
• Competition based pricing


  Setting prices based on competitors' strategies, costs, prices, and market offerings

  
• Consumers will base their judgments of a product's value on the prices that competitors charge for similar products

  
• Price elasticity of demand


  A measure of the sensitivity of demand to changes in price
• Pricing strategies


  • New product pricing strategies - market-skimming pricing and market penetration pricing
  • Product-mix pricing strategies - optional product pricing, captive product pricing, product-bundle pricing
  • Price adjustment strategies - discounts, promotional pricing
  • Price discrimination