Cost Plus Pricing
Share Driven Pricing - Some Companies are driven to get the most market share. But your goal shouldn’t be market share but maximizing contribution margin.
Value Creation – Economic Value, Offering Design, Segmentation. Product manager face challenge as they are expected to set prices that capture the value offered by their products that also maximize price. Typically turns to marketing, where research is completed. Example research shows 10% higher customer response, but doesn’t gaurntee payment of 10% more.
Price Structure – Price Structure aligned with the value received instead of the products delivered. Two techniques to creating a price structure: Price metric and fences.
Price Metrics are simply the unit by wich price is applied to the product or servies. Barbers serving primarly male clients – fair because each hair cut takes the same amount of time. Not the same in female hair salon. Some haircuts take longer and require more skill.
Price Fencing – ways to segment the market. Buyer identification (how much do they know). Segment the buyer by how much they know.
Segment by ID - Military discounts.
Segment by location - HEB in Borne vs San Antonio
Segment by time of purchase – Lunch prices, matinee movies, happy hour.
Segment by Quantiy – by how much you buy, Quanity discounts, volume discounts.
Segment by product design.
Price and value communication - Marketer must address issues through effective price and value creation. Ex. IPOD $229 thought to originally be price to high for what you get. Apple responded by putting cutting edge music and large camapaign to give the IPOD credibility w/ less informed people through huge campaign.
Pricing Policy – Pricing involve the art of managing expectations of customers & employees to encourage more profitable behaviors. Ex. Gillete offering “one time price” discounts to delivery by end of quarter. Slowed orders and
Value Creation – Economic Value, Offering Design, Segmentation. Product manager face challenge as they are expected to set prices that capture the value offered by their products that also maximize price. Typically turns to marketing, where research is completed. Example research shows 10% higher customer response, but doesn’t gaurntee payment of 10% more.
Price Structure – Price Structure aligned with the value received instead of the products delivered. Two techniques to creating a price structure: Price metric and fences.
Price Metrics are simply the unit by wich price is applied to the product or servies. Barbers serving primarly male clients – fair because each hair cut takes the same amount of time. Not the same in female hair salon. Some haircuts take longer and require more skill.
Price Fencing – ways to segment the market. Buyer identification (how much do they know). Segment the buyer by how much they know.
Segment by ID - Military discounts.
Segment by location - HEB in Borne vs San Antonio
Segment by time of purchase – Lunch prices, matinee movies, happy hour.
Segment by Quantiy – by how much you buy, Quanity discounts, volume discounts.
Segment by product design.
Price and value communication - Marketer must address issues through effective price and value creation. Ex. IPOD $229 thought to originally be price to high for what you get. Apple responded by putting cutting edge music and large camapaign to give the IPOD credibility w/ less informed people through huge campaign.
Pricing Policy – Pricing involve the art of managing expectations of customers & employees to encourage more profitable behaviors. Ex. Gillete offering “one time price” discounts to delivery by end of quarter. Slowed orders and