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BXY207 Reading 9: The Marketing Mix - Price - Coggle Diagram
BXY207 Reading 9: The Marketing Mix - Price
Price
The cost of exchange in return for an offering
It can represent an absolute decision criterion
Key purchasing consideration
Can signal inferred quality exclusivity or expertise
Ethical considerations
Dynamic pricing - Assessing the needs and characteristics of buyers and adjusts price accordingly (Kotler and Armstrong, 2016)
Segmented pricing - Different prices based on customers, products or locations (Kotler and Armstrong, 2016)
Super-sized pricing - used to entice consumers into purchasing more than they need by offering a greater quantity at a lower price
Price is also a means of creating value for customers and developing customer relationships (Kotler and Armstrong, 2016)
Types of pricing
Cost-based
Used to work out how many units would need to be sold to cover the full cost
(Break even analysis)
Direct cost pricing or marginal cost pricing: Only taking account of costs that increase as sales go up (Jobber and Ellis-Chadwick, 2013)
Second-market discounting: Charging different priced to different markets (Blythe, 2006)
Cost-plus pricing: Adding a percentage for profit to the cost of a product
Competitor-based
Pricing set in relation to competition's pricing
Many companies prefer to differentiate and use customer-based pricing
Kotler and Armstrong (2016, p. 332) Reccommend asking these questions:
How do market offerings compare in terms of customer value?
How strong are competitors?
What are pricing strategies?
Customer-based
Involves setting the price of an offering on its value to customers
Demand pricing - based on customers willingness to buy a companies offering (Blythe, 2006)
Good-value pricing - Based on quality and price (Kotler and Armstrong, 2016, p. 327)
Value-added pricing - Adding features to increase the value of an offering
Psychological based pricing - based on eliciting an emotional response/perception
Product mix pricing (Kotler and Armstrong, 2016)
Takes into account the differing costs, competition and demand
Product line pricing - Based on the level of value each offers to buy
Optional product pricing - Optional products or accessories alongside the principal product
Captive product pricing - Products required to use the principal product
Byproduct pricing - Offsetting the cost of the principal product by finding ways to sell byproducts incurred in the production
Product bundle pricing - Selling a set of related products at a lower price than buying individually
Pricing in business markets
Businesses are concerned with saving costs and increasing revenue (Jobber and Ellis-Chadwick, 2013)
Companies often also offer a variety of discounts to intermediaries. These include (Dibb et al., 2016)
Trade or functional discounts - offered by producer for doing a particular thing
Quantity discounts - Economies of scale/cumulative discounts
Cash discounts
Seasonal discounts - buying out of season
Allowances - reductions for related actions that help to achieve the sellers goals
Grigsby's 4 approaches for informing price (2015)
General survey
Price sensitivity analysis (over time)
Conjoint analysis - asks customers to make decisions on a case study
Elasticity modelling - assesses sensitivity to price
Kotler and Armstrong (2016) identified a 5th - Experimentation