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Topic 9 : Pricing and Credit Strategies - Coggle Diagram
Topic 9 : Pricing and Credit Strategies
Discuss the relationship among pricing, image, competition and value.
Pricing : Company need to know where to increase and decrease in price.
Image : Target market and identify how much customers are willing to pay rather than how much to charge.
Competition : Must take account competitors price(not to necessarily beat competitor) , and differentiate company's product and services.
Value : Objective value: Value customer willing to pay if they understood perfectly the benefit the product can deliver.
Perceived value :Determine the price customer are willing to pay
Describe effective pricing techniques for introducing new products or services and for existing ones.
Odd pricing : : Establish prices that ends in odd numbers with the belief that merchandise selling with an odd ending number (RM12.95) is cheaper than an item evenly priced (13.00)
Price lining : Manager stocks merchandise in several different price ranges, or price lines. Each category of merchandise contains items that are similar in appearance, quality, cost performance or other features making it less complicated for the customer.
Freemium pricing : A mix of the words “free” and “premium” – is a pricing strategy that business use if they want to offer customers free services in addition to paid options.
Dynamic pricing : Setting different prices for the same products and service for different customers based on information they have collected about their customers. – Having good relationship to customer and give lower price
Leader pricing : Small retailer marks down the customary price of a popular item in an attempt to attract more customers.
Geographic pricing : Setting different prices for customers located in different territories because of different transportation costs.-Discount
Discounts (markdowns) : When products make reductions from normal list prices to move stale, outdated, damaged, or slow-moving merchandise. This includes multiple unit pricing
Bundling : A pricing method that involves grouping together several products or services, or both , into a packages that offers customers extra value at a special price.
Optional-product pricing : This is a technique that involves selling the base product for one price but selling the options or accessories for it at a much higher markups.
Captive-product pricing : This techniques involves selling a product for a low price and charging a higher price for the accessories that accompany it .
By-product pricing : This technique uses the revenue from the sale of byproducts to be more competitive in pricing the main products.
Suggested retail prices : Accepting the manufacturer’s suggested price does not take into consideration the small firm’s cost structure, image, or competitive situation. This approach does simplify pricing.
Follow-the-leader pricing : Basing prices on competitor’s price points.
Explain the pricing methods and strategies for retailers, manufacturers and service firms.
Variable (Direct) costing is more useful due to fixed overhead expenses are considered to be expenses of the period, thus, constant unit cost for the product regardless of the production level. The result is a clear picture of the price-cost-volume relationship.
absorption costing is not very helpful in settling prices because it confuses the true relationships among price, volume, and cost by including fixed expenses in unit-cost computations.
Cost-plus pricing : A manufacturer establishes a price that covers the cost of direct materials, direct labor, factory overhead, selling and administrative costs, and a desired profit margin.
Describe the impact of credit and debit cards and mobile wallet on pricing.
Mobile wallets :
Applications that link a smart phone or tablet to a credit or debit card, transforming the device into a digital wallet.
Growing form of payment.
Installment credit : Is finance overtime and often requires small business owners to turn to local banks and credit unions. If they have the financial strength to carry their “own paper:. It can be a major source of interest income, which technically can subsidize prices
Trade credit : Also refer to as customer charge accounts , can be a drain on small business cash reserves.
Layaway : A 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 .
Debit cards:Shoppers make almost 53 billion debit card transactions, totaling $2.1 trillion each year.
E-commerce and Credit Cards
-To minimize credit card fraud
:
Use an address verification system
Require a CVV2 number
Check customers IP addresses
Monitor Web site activity with analytics
Verify large orders
Post notices on Web site that your company uses anti-fraud technology
Contact the credit card company or bank that issued the card