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Pricing Understanding and Capturing Customer Value - Coggle Diagram
Pricing Understanding and Capturing Customer Value
What is a price?
price is the amount of money charged for a product or a service. More broadly, price is the sum of all the values that customers give up to gain the benefits of having or using a product or service.
A small percentage improvement in price can generate a large percentage increase in profitability. It is important to realize the key parts that pricing takes place in the business and to not run from it but embrace it
Setting the right price is one of the marketer’s most difficult tasks. Finding and implementing the right price strategy is critical to success.
If customers perceive that the product’s price is greater than its value, they will not buy the product. Product costs set the floor for prices. If the company prices the product below its costs, the company’s profits will suffer.
Major Pricing Strategies
Customer Value Based Pricing
Setting price based on buyers’ perceptions of value rather than on the seller’s cost.
The Company sets the cost but Marketing must then convince buyers that the product justifies the price with the value. If the price turns out to be too high, the company must settle for lower sale resulting in disappointing profits.
Cost Based Pricing
Cost-based pricing involves setting prices based on the costs for producing, distributing, and selling the product plus a fair rate of return for its effort and risk.
Good Value Pricing
Offering the right combination of quality and good service at a fair price.
Value Added Pricing
Attaching value-added features and services to differentiate a company’s offers and charging higher prices.
Competition Based Pricing
Setting prices based on competitors’ strategies, prices, costs, and market offerings.
Annie Bloom’s Books isn’t likely to win a price war against Amazon.com or Barnes & Noble. Instead, it relies on outstanding customer service and a cozy atmosphere to turn booklovers into loyal customers.
Types of Costs
Fixed Costs
Costs that do not vary with production or sales level.
Variable Costs
Costs that vary directly with the level of production.
Total Costs
The sum of the fixed and variable costs for any given level of production.
Demand Curve
A curve that shows the number of units the market will buy in a given time period, at different prices that might be charged.
Helps analyze the demand of the product for the price charged