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PRICE (Economic Framework (Economic Value to the Customer (Identify…

- - - - Lifecycle (Focal Product)
      - Cost elements
      - total lifecycle cost
      - determine equivalent units of comparison product
      - repeat 2&3 for comparison product
    - - Customer differences (prefer short life & low price)
      - Convince customers (myopic - pay now, gain later!)
      - Based on life cycle cost (difficult to figure)
      - Functional & psychological benefits ignored
  - - - E < 1 inelastic demand, a small change in price produces a smaller change in demand
      - E = 1 unitary elastic demand, a change in price produces an equivalent change in demand
      - E > 1 elastic demand, small change in price produces a large change in demand
  - - - standard markups, cost-plus, experience curve
    - - target profit, target profit-on-sales, target ROI
    - - above/at par/below, loss-leader, product-line pricing
  - - - Subsidy pricing
      - marketing skimming vs. market penetration
- - - - obsession with one of the signals
      - overlook the (side) effects of the proposed marketing/policy actions on the "other" signal
    - - acknowledge both signals, but...
      - neglect differential/relative sensitivity of GO vs/ STOP signals
  - - - Reducing pain of payment: mode of payment, odd-even prices ("9-ending" prices), round vs. precise prices
      - highlighting benefits maximization
        
        discounts vs. rebates
        
        shifting the "reference price"
    - - reference price = standard of comparison against which an observed price is compared
      - Internal: influenced by decision maker's
        
        experience
        
        knowledge
        
        price expectations
        
        idea of price "fairness"
        
        demand (a priori) vs. demand (mid-way changes)
        
        demand for non essentials vs. demand for essentails
        
        cost of raw materials vs. other costs
        
        demand-based pricing vs. supply-restriction
        
        cost-based vs. demand-based