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The Marketing Mix - Pricing: Block 1 - Reading 9 - Coggle Diagram
The Marketing Mix - Pricing: Block 1 - Reading 9
Ethical Considerations
Segmented Pricing - charging different prices based on customer/location differences (some forms of price discrimination can be illegal e.g. EU nationality/residence rules).
Super-sized Pricing - enticing consumers into buying larger quantities which can conflict with health goals or cause envrionmental waste.
Dynamic Pricing - tailoring prices per individual user based on data mining
Introduction to Pricing
Role - the only element of the marketing mix that generates revenue while others are costs, acts as an exchange cost, quality/exclusivity signal, value creator and easily manipulated promotion tool.
Three Main Approaches to Pricing
Competitor-Based Pricing
Going-Rate Pricing - charging similar prices when products lack differentiation.
Competitive Bidding - pricing services based on anticipated competitor bids.
Customer-Based (Value-Based) Pricing
Driven by customer value rather than costs.
Types - demand pricing, good-value pricing, value-added pricing and psychological-based pricing (prestige and odd-even pricing like £7.99).
Cost-Based Pricing
Cost-Plus / Mark-up Pricing - adds a percentage/margin for profit, popular in professions and retail, though ignores demand and competition.
Direct / Marginal Cost Pricing (Second-Market Discounting) - covers direct costs during off-peak capacity (e.g. theatres, hotels)
Full/Total Cost Approach - uses break-even analysis to cover fixed and variable costs
Product Mixing Price
Captive-Product Pricing - pricing essential associated items needed for the main product (e.g. printer ink, coffee filters).
By-Product Pricing - selling production wate/by-products to offset primary product costs.
Optional-Product Pricing - pricing optional accessories or features.
Product Bundle Pricing - selling a set of products together at a lower price than individually (e.g. meals deals).
Product Line Pricing - setting price steps across a product range based on features/value (e.g. car variants).
Factors Affecting Pricing Decisions
Synthesised across textbooks (Jobber & Ellis-Chadwick, Dibb et al., Kotler & Armstrong): Costs, competition and value perceptions form the core overlap.
Additional factors include organisational/pricing objectives, marketing strategy, marketing mix, buyer price perceptions, legal/regulatory issues, STEEPLE factors and internal decision-makers.
Pricing in Business Markets (B2)
Focuses on Economic Value to the Customer (EVC) saving costs or increasing revenues.
Intermediary Discounts - trade/functional discounts, quantity discounts, cash discounts, seasonal discounts and promotional allowances.
Approaches for Informing Pricing Decisions
Conjoint analysis (trade-off choices in scenarios)
Elasticity modelling (measuring unit price sensitivity)
Van Westendorp survey (price sensitivity analysis/price maps)
Experimentation (testing value perceptions)
General surveys (nice to know you feedback)