Pricing Strategy
Developing Pricing Strategies and Programs
Marketing Management
Price Changing in the Internet
Internet reverse the fixed pricing trend, since:
Buyers can: Get instant price comparisons from thousands of vendors. Name their price and have it met. Get products free. Both Buyers and Sellers can: Negotiate prices in online auctions and exchanges Sellers can: Monitor customer behavior and tailors offers to individuals. Give certain customers access to special prices.
Consumer Psychology and Pricing
Economists assume:
The consumer are “price takers”. Consumers accept price at “face value”.
Marketers recognize, that consumers often actively:
Process information Interpreting price from their knowledge Formal communications Informal communications Other factors
Consumer Psychology and Pricing (cont.)
Consumer perceptions of price based on: Reference Price To compare an observed price to an internal reference price their remember Price-Quality Inference Use price as an indicator of quality Price Ending Price should end in an odd number Pricing Cues Limited availability
Setting the Price
Six step procedure
1. Selecting the pricing objective 2. Determining demand 3. Estimating costs 4. Analyzing competitor’s cost, prices and offers 5. Selecting a pricing method 6. Selecting the final price
Step 1 Selecting the Pricing Main Objectives
Survival
> Overcapacity, intense competition or changing consumer wants.
Maximum Current Profit
> Emphasizing current performance.
Maximum Market Share
> Market Penetration Pricing Strategy.
Step 1 Selecting the Pricing Main Objectives
Maximum Market Skimming
> Skim the maximum revenue from various segments.
Product-quality Leadership
> High quality = premium price.
Other Objectives
Determining Demand
Price Sensitivity
> Understanding customers’ sensitivity in price to estimate demand.
Step 2
Estimating Demand Curve
Measure to attempt to measure demand curves: > Surveys >
Marketing Management
Price Changing in the Internet
Internet reverse the fixed pricing trend, since:
Buyers can: Get instant price comparisons from thousands of vendors. Name their price and have it met. Get products free. Both Buyers and Sellers can: Negotiate prices in online auctions and exchanges Sellers can: Monitor customer behavior and tailors offers to individuals. Give certain customers access to special prices.
Consumer Psychology and Pricing
Economists assume:
The consumer are “price takers”. Consumers accept price at “face value”.
Marketers recognize, that consumers often actively:
Process information Interpreting price from their knowledge Formal communications Informal communications Other factors
Consumer Psychology and Pricing (cont.)
Consumer perceptions of price based on: Reference Price To compare an observed price to an internal reference price their remember Price-Quality Inference Use price as an indicator of quality Price Ending Price should end in an odd number Pricing Cues Limited availability
Setting the Price
Six step procedure
1. Selecting the pricing objective 2. Determining demand 3. Estimating costs 4. Analyzing competitor’s cost, prices and offers 5. Selecting a pricing method 6. Selecting the final price
Step 1 Selecting the Pricing Main Objectives
Survival
> Overcapacity, intense competition or changing consumer wants.
Maximum Current Profit
> Emphasizing current performance.
Maximum Market Share
> Market Penetration Pricing Strategy.
Step 1 Selecting the Pricing Main Objectives
Maximum Market Skimming
> Skim the maximum revenue from various segments.
Product-quality Leadership
> High quality = premium price.
Other Objectives
Determining Demand
Price Sensitivity
> Understanding customers’ sensitivity in price to estimate demand.
Step 2
Estimating Demand Curve
Measure to attempt to measure demand curves: > Surveys >