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Reading 9: The Marketing Mix - Pricing - Coggle Diagram
Reading 9: The Marketing Mix - Pricing
FACTORS AFFECTING PRICING DECISIONS
TYPES OF PRICING
cost-based pricing
full/total cost approach
works out how many units need to be sold at different price levels to cover the full costs using break-even analysis
limitation - if sales fall, prices would need to be raised to compensate and break even - could affect further sales
direct cost pricing/marginal cost pricing
only taking account of costs that increase as sales go up
services use this when capacity would otherwise not be used (sometimes called second-market discounting
fixed costs would need to be used at all other times
cost-plus pricing/mark-up pricing
adding a percentage for profit to the cost of a product
doesn't take account of customer demand or what competitors charge
competitor-based pricing
may charge similar price to competitors if there is little differentiation
if a product is perceived to offer greater value than its competitors, a higher price may be charged
if a product is perceived to offer lower value than its competitors, they may have to charge a lower price
competitive biding
companies price their services in relation to what they think competitors might charge for their bids
customer-based pricing
involves setting the price of an offering on its value to customers
demand pricing
good-value pricing
value0added pricing
psychological-based pricing
PRODUCT MIX PRICING
product line pricing
pricing different products in a range based on the level of value each offers to buyers
by-product pricing
offsetting the cost of a main product by finding a way to sell by-products made during production
captive-product pricing
associated products needed to use the main product
product bundle pricing
selling a set of related products in a bundle at a price lower than if purchased individually
optional-product pricing
offering optional products/accessories alongside main product
PRICING IN BUSINESS MARKETS
businesses will prefer and option that will aid them in lowering their own costs or increasing their revenues
quantity discounts
cash discounts
trade/functional discounts
seasonal discounts
allowances
APPROACHES FOR INFORMING PRICING DECISIONS
general survey
simple approach
asking customers in different segments for feedback
customers might state that prices are too high which provides little insight
Van Westerndorp survey
also called a price sensitive analysis
asking customers questions that assess changes in their sensitivity to price over time
then plotted onto a 'price map'
conjoined analysis
presents customers with a scenario and asked them to make a series of choices relating to product purchase
useful for new products
limitation - it artificially limits its usefulness
elasticity modelling
rarely used
can be helpful for assessing customers' sensitivity to unit price changes
experimentation
may test customers' perceptions of a product's value
ETHICAL CONSIDERATIONS
dynamic pricing
assessing needs and characteristics of individual buyers and adjusting prices offered accordingly
segmented pricing
charging different prices for a product/service based on differences in customers, products or locations
super-sized pricing
entices customers into purchasing more than they need by offering greater quantities and lower costs
