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Reading 9 - The Marketing Mix: Pricing - Coggle Diagram
Reading 9 - The Marketing Mix: Pricing
Types of pricing
Three main approaches to pricing
Cost-based pricing
Competitor-based pricing
Customer-based pricing
Cost-based pricing
A full or total cost approach may be used to work out how many units would need to be sold at different price levels to cover the full cost of production, distribution and marketing using break even analysis
Limitation is that if sales fall, prices would need to be raised to compensate and break even
Only taking account of costs that increase as sales go up is called direct cost pricing or marginal cost pricing
Mark up pricing - adding percentage for profit to the cost of the product
Competitor-based pricing
Pricing is set in relation to competitors
If a company's offering is perceived to offer great value to customers than its competitors then a higher price may be charged
Competitor bidding - companies price services in relation to what they think competitors might charge in their bids
Customer-based pricing
Marketing is based on the exchange of value
Customer based pricing involves setting the price of an offering on its value to customers
Demand pricing - setting price based on a customers professed willingness to buy a customers offering at various price points
Good value pricing - setting a fair price based on a balance of quality against price
Value-added pricing - adding features or services to increase the value of an offering to consumers that differentiates it from competitors and enables a higher price to be charged
Psychological-based pricing - involves using price to elicit an emotional response
Factors that affect pricing decisions
Cost
Competition
Value perceptions
Objectives
Marketing strategy
Pricing
STEEPLE
Product mix pricing
Product line pricing
Pricing different products in a range based on the level of value each offers to buyers
Optional product pricing
Offering optional products or accessories alongside the principal product
Captive product pricing
Associated products needed to use the principal product
By product pricing
Offsetting the cost of a principal product by finding a way to sell by products incurred in the principal products production allowing the principal products price to be set more competitively
Product bundle pricing
Selling a set of related products in a bundle at a price lower than if purchased individually
Pricing in business markets
Discounts to encourage purchase behaviour
Trade or functional discounts
Quantity discounts
Cash discounts
Seasonal discounts
Allowances
Approaches for informing pricing decisions
General survey
Price sensitivity analysis
Conjoint analysis - scenarios
Elasticity modelling
Experimentation
Ethical considerations
Dynamic pricing - assess needs and characteristics of individual buyers and adjusting price offered accordingly
Segmented pricing - charging different prices of a product or services based on differences in customers products or locations
Super sized pricing - greater quantity at lower price