Please enable JavaScript.
Coggle requires JavaScript to display documents.
8 pricing strategy and management (pricing considerations (objectives (ROI…
8 pricing strategy and management
pricing considerations
objectives
ROI
enhancing brand image
improving customer value
maintaining price stability
factors/constraints
sealing
demand factors
floor
direct variable costs
downward influence
competitive factors
upward influence
corporate objectives
aspects
indicator of value
value= perceived benefit/price
price elasticity of demand
inelastic
cigarettes
elastic
small change in price equals large change in quantity demanded
factors
number of substitutes
number of uses
ratio to the income of the buyer
cross-price elasticity
complements
decreased price of A results in increased demand of B and vice versa
razor and blades, console and video games
substitutes
decreased price of A results in decreased demand of B and vice versa
pricing strategies
Full cost pricing
consider both variable and fixed costs
forms
markup pricing
adding a percentage to the cost of the product
markup price = total unit cost/ (1- desired markup)
advantage
simplicity
flexibility
controllability
disadvantage
does not take price electricity and competition into account if applied in a general manner
break-even pricing
rate-of return pricing
variable cost pricing
rational
demand-oriented pricing
shift demand
restaurants in February
cinemas at week days
stimulate demand
increased revenues which will lead to economies of scale which will lower unit costs and lead to greater profits in the long run
airlines uses it because they has to maintain flight schedule whether or not the flight holds passengers
new offering
three strategies
skimming
price it set very high initially and is typically reduced over time
conditions
inelastic demand
different market segments with different price sensitivity
high barriers to entry, patent, copy write or trade secret
unknown production or marketing costs
capacity constraint in producing the product/service
need of recovering funds
realistic percieved value in product
penetration
price is set very low in order to capture market share as fast as possible
conditions
elastic demand
no barriers to entry
no distinct price market segments
economies of scale
objective is to obtain large market share
intermediate pricing strategy
competitive interaction
antidote to nearsightedness and focus on price competition
look forward and reason backward
envision patterns of future pricing moves, competitor countermoves, and likely outcomes
step into the shoes of rivals
what are the competitors goals and objectives? how are they different from ours?
what assumptions has the competitor about itself our company, and offerings, and the marketplace? do they differ from ours?
What does the competition believe its strengths and weaknesses are? What do they believe about us?
price wars
risk factors
undifferiented offerings
stable/decreasing market growth rate
high price visibility
high buyer price sensitivity
declining industry cost trend
low capacity utilization
many competitors