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Pricing and credit strategies - Coggle Diagram
Pricing and credit strategies
Image, competition, value
Competition and pricing
must take into account competitors’ prices, but it is not always necessary to match or beat them.
to differentiate a company’s products and services
Focus on value
the “right” price for a product or service depends on the value it provides for a customer.
Objective value
- products and services is what customers would be willing to pay if they understood perfectly the benefits that a product or service delivers
Perceived value
- determines the price customers are willing to pay.
Price conveys image
sends important signals to customers like quality, uniqueness
to understand the target market and identify how much customers are willing to pay rather than how much to charge.
Dealing with rising costs
Communicate with customers
Add a surcharge
Focus on improving efficiency
Offer products in smaller sizes or quantities
Pricing techniques for introducing new product
Three Goals
Getting the product accepted
Revolutionary products
Evolutionary products
Me-too products
Maintaining market share as competition grows
Earning a profit
Three Pricing strategies
Penetration
used by businesses to attract customers to a new product or service by offering a lower price during its initial offering.
Skimming
charges a high initial price and the gradually lowers the price to attract more price-sensitive customers
Life cycle pricing
selling products in which pricing correlates with a product’s location in its life cycle which are launch, growth, maturity and declination.
Pricing established goods
Dynamic pricing
Leader pricing
Freemium pricing
Discounts (markdowns)
Price lining
Bundling
Odd pricing
Suggested retail prices
Pricing for manufacturers
Absorption costing
traditional method of product costing in which all manufacturing and overhead costs are absorbed into the product’s total cost.
Variable or direct costing
product costing method that includes in the product’s costs only those costs that can vary directly with the quantity produced.
Cost-plus pricing
establishes a price that covers the cost of direct materials, direct labor and a desired profit margin.
Impact of Credit on Pricing
Installment credit
financed over time and often requires small business owners to turn to local banks and credit unions
Trade credit
also referred to as customer charge accounts, can be a drain on small business cash reserves.
Debit cards
Shoppers make almost 53 billion debit card transactions, totaling $2.1 trillion each year.
Layaway
purchasing method by which a consumer places a deposit on an item to “lay it away” for later pickup when they come back and pay the balance.
Mobile wallets
Applications that link a smart phone or tablet to a credit or debit card, transforming the device into a digital wallet.