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The marketing mix - pricing - Coggle Diagram
The marketing mix - pricing
Cost-based pricing
Limitation if sales fall, prices need to be raised - could jeopardise future sales
Amount of units need to be sold at different price levels to cover full cost of production, distribution and marketing using break-even analysis
Only accounting for costs that increase as sales rise is direct cost pricing or marginal cost pricing
Fixed costs need to be covered at other times
Referred to as second-market discounting as it involves charging different prices to different
Also covers charging of different prices in international markets
Approach used in service offering where capacity would otherwise be unused
Cost-plus pricing involves adding percentage for profit to cost of product
Called mark-up pricing
Perceived to be fair but doesn't account for customer demand or what competitors charge
Competitor-based pricing
Pricing's set in relation to competitors - company may choose same price as competitors if there's little differentiation
If offering appears to offer great value then a higher price might be charge and vice versa
Another form is competitive bidding where companies price services in relation to what they think competition might charge
In bidding, profit must be balanced against chances of winning a bid and info that can be obtained
Customer-based pricing
Setting price of offering on its value to customers
Includes demand pricing, good-value pricing, value-added pricing and psychological-based pricing
Means value in relation to meeting customer needs has to be considered early
Determining customer value's more difficult and involves accounting for range of factors
Factors that affect pricing decisions
Most mentioned factors cost, competition and value perceptions
Objectives and marketing strategy are important
Needs to be considered with marketing mix, other products, value offered by products and justification of price in mind
Elements of macro and micro environment (STEEPLE) must be considered
Who sets and influences pricing within organisation will affcect pricing
Product mix pricing
Pricing has to take into account differing costs, competition and demand among other products and find price that maximises profit
5 types of product mix pricing:
Product line pricing
Optional-product pricing
Captive-product pricing
By-product pricing
Product bundle pricing
Pricing in business markets
Concept of economic value to customers (EVC) is important - businesses concerned with saving costs and increasing revenue
Businesses choose best option that supports in lowering own costs or increasing revenues
May offer variety of discounts to intermediaries
Trade/functional discounts
Quantity discounts
Cash discounts
Seasonal discounts
Allowances
Approaches for information pricing decisions
4 approaches for informing price decisions
General survey
Van Westendorp survery/price sensitivity analysis
Conjoint analysis
Elasticity modelling
Another approach said to be experimentation
Ethical consideration
Some forms of pricing raise ethical concerns
Dynamic pricing
Segmented pricing
Super-sized pricing