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Pricing (Pricing Strategies (New Product, Product Mix, Discount &…
Pricing
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Price Cuts
Price Increase
Seen by buyers as:
1) Replaced by new products
2) Models not selling well
3) Company is in financial trouble
4)Reduced Quality
5) Price will drop further
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Definition
Sum of all values that consumer exchange for benefits of products/services
Affects buyer's choice
Produces revenue out of 4Ps
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Cost Base Pricing
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Certainty about costs
Pricing is simplified
Price competition is minimized
Much fairer to buyers & sellers
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Cost that don't vary with sales or product. EG: Salaries, Rents
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Profit Pricing
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Analysis is used to determine price at which firm will break even or make profit
X-Axis: Sales, Y-Axis: Costs
Cost Base v Value Base
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Cost Base: Product > Cost > Price > Value > Customer
Value Base: Customer > Value > Price > Cost > Product
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Tim Cook claims that:
1) Apple doesn't want to sell the most, but the best
2) People are paying for high-quality products
3) Products are affordable as carriers are subsidizing consumers with their packages
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Global brands like Nike & Addidas can price higher as they give consumers better experiences and are able to show that their products are better
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Pure competition: Many buyers and sellers who have little effect on the price
Monopolistic competition: Many buyers and sellers who trade over a range of prices
Oligopolistic competition: Few sellers who are sensitive to each others pricing/marketing strategy
Pure monopoly: Single Seller
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Demand Curve: No. of units the market will buy in a given time period charged at different prices
Price Elasticity: How responsive demand will be to price change. % change in quantity demand / % change in price
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Demand curve usually: Lower the price, higher the demand
Demand curve sepcial: Higher the price, Higher the demand EG: Rolex
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Elastic: Price change, Demand change
Inelastic: Price change, Demand no change
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EG: Economy, Resellers, Government, Social Concerns
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EG: Intel
Set high price during new product launch
Skim through each layer of consumer while dropping price to maximize revenue
Results in fewer but more profitable sales
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Conditions
1) Product quality must justify price
2) Cost cant be high, if not not worth
3) Competitors cannot enter market easily
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EG: Grab
Set low price to penetrate market quickly and deeply
Attract large no. of buyers & win shares
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Conditions
1) Market must be price sensitive
2) Production/Distribution cost must fall as sales increase
3) Must keep out competition/maintain benefits
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EG: Meat and Animal Food
Animal Food is sold off as by product to make main product's price more competitive
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Cash Discount
Seasonal Discount
Quantity Discount
Trade-in Allowance
Functional Discount
Promotional Allowance
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EG: $99.99
EG: Shop intro $1000 suit to make $500 suit look not expensive
When consumer cant judge the product's quality, they use the price
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Loss Leaders
Special Event Pricing
Cash Rebates
Low Interest Financing
Longer Warranties
Free Merchandises
Discounts
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EG: Air Carriers
Fixed: 1 type of aircraft, so employees only have to be trained on one type of plane
Variable: No inflight entertainment system can save on cost
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