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Understanding and Capturing Customer Value - Coggle Diagram
Understanding and Capturing Customer Value
Price
is the amount of money charged for a product or service
The sum of all the values that consumers give up in order to gain the benefits of having or using a product or service
is the only element in the marketing mix that produces revenue; all other elements represent costs
Factors to Consider When Setting Prices
Customer Perception of Value
Value-based pricing uses the buyers’ perception of value, not the seller’s cost, as the key to pricing. Price is considered before the marketing program is set
Value-based pricing
Value-added pricing
Value-added pricing attaches value-added features and services to differentiate offers, support higher prices, and build pricing power.
Pricing power is the ability to escape price competition and to justify higher prices and margins without losing market share.
Good-value pricing
Good-value pricing offers the right combination of quality and good service to fair price.
Existing brands are being redesigned to offer more quality for a given price or the same quality for less price
Everyday low pricing (EDLP) involves charging a constant everyday low price with few or no temporary price discounts
High-low pricing involves charging higher prices on an everyday basis but running frequent promotions to lower prices temporarily on selected items.
Company and Product Costs
Cost-based pricing
Average cost
Total costs
Variable costs
Packaging
Raw materials
Fixed costs
Executive salaries
Interest
Utilities
Rent
Experience or learning curve is when the average cost falls as production increases because fixed costs are spread over more units.
Markup price = UC/(1-DRoS)
Break-Even Analysis and Target Profit Pricing
Break - even volume = Fixed cost/(Price - Variable cost)
Other Internal and External Considerations Affecting Price Decisions
Overall Marketing Strategy, Objectives and Mix
Pricing objectives
Survival
Profit maximization
Market share leadership
Customer retention and relationship building
Attracting new customers
Opposing competitive threats
Increasing customer excitement
Target costing
Non-price strategies
The Market and Demand
Types of markets
Pure competition
Monopolistic competition
Oligopolistic competition
Pure monopoly
Price Elasticity of Demand
Price elasticity of demand illustrates the response of demand to a change in price.
Inelastic demand occurs when demand hardly changes when there is a small change in price.
Elastic demand occurs when demand changes greatly for a small change in price.
Competitors’ Strategies and Prices
Factors to consider
Comparison of offering in terms of customer value
Strength of competitors
Competition pricing strategies
Customer price sensitivity