Please enable JavaScript.
Coggle requires JavaScript to display documents.
Product pricing (Stages of establishing prices (5. Selection of pricing…
Product pricing
Stages of establishing prices
1. Developing pricing objectives
Goals that describe what a company wants to achieve through pricing
2. Assessment of target market's evaluation or price
Price depends on type of product - low priced product or premium priced product (price sensitivity)
Price also depends on the perception of value
3. Evaluation of competitor's prices
Sometimes, an organisation's prices are slightly above competitors' to generate a low-cost image
4. Selection of a basis for pricing
Cost-based pricing
Cost-plus pricing: adding specific dollar or percentage amount to seller's costs
Mark up pricing: adding to the cost of the product a predetermined percentage of that cost
Value based pricing
Base on the level of benefits offered by the products
Competition-based pricing
Influenced primarily by competitor's prices
5. Selection of pricing strategy
Differential pricing- Different price to different buyers
New - product pricing
Price skimming- Charge highest possible price
Penetration pricing- Setting lower than competitors to penetrate market and gain a significant market share quickly
Psychological pricing- $12.99 or $12.95 instead of $13.00
Professional pricing- High prices set by specialists of people with great skill - doctors
Price discounting- trade, seasonal sales
6. Determination of specific price
Factors that affect pricing decisions
Organisational and marketing objectives
Prices set consistent with goals of the organisation
Survival
Current profit maximisation
Product-quality leadership
Market share leadership
Pricing objectives
Increase market share
Set price lower than competitors
Temporary price reduction
Raise cash quickly
Temporary price reduction
Costs
Costs set the price floor
Selling below costs is not good long term solution
Costs reduction is trend for price sensitive market
Marketing mix variables other than price
Product
High quality product associated with high price
Place
Premium priced products used selective distribution
Lower priced products use intensive distribution
Promotion
Premium prices less promoted
Personal selling more common for high premium priced products
Customer perceptions of the product
Value conscious
Price conscious
Prestige sensitive
Customer interpretations in response to price
Interpretation - what the price means and communicates to the customer
Response - will the price move customer closer to purchase and customer satisfaction
Demand
Demand curve is different for normal products and prestige products
Price is the value exchanged for the a product in marketing transaction
