Pricing Strategy. 8. C H A P T E R. Pricing. Is a key factor in producing revenue for the firm Is the easiest of all marketing variables to change Is an important consideration in competitive intelligence
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C H A P T E R
Four key issues:
The Buyer’s Perspective on Pricing
Two key issues:
Price sensitivityThe Role of Pricing inMarketing Strategy (1 of 2)
A buyer’s market occurs when:
Large number of sellers in the market
Many substitutes for the product
Economy is weak
A seller’s market occurs when:
Products are in short supply
Products are in high demand
Economy is strongThe Role of Pricing inMarketing Strategy (2 of 2)
Myth #2 – When business is bad, a price cut will stimulate sales.
Price cutting is generally not in the best interests of the firm unless sales volume will increase.
A better strategy is to build value into the product offering at the same (or even a higher) price.The Relationship BetweenPrice and Revenue
Pricing Objectives market share.
Supply and Demand
The Firm’s Cost Structure
Competition and Industry Structure
Stage of the Product Life CycleKey Issues in Pricing Strategy
Allows simultaneous control of capacity and demand market share.
Control capacity by limiting available capacity at certain price points
Control demand through price changes and overbooking capacityPrice Elasticity and Yield Management
Situations that increase price sensitivity: market share.
Availability of product substitutes
Higher total expenditure
Easy price comparison
Situations that decrease price sensitivity:
Real or perceived necessities
Lack of product substitutes
Perceived product benefits
Situational influencesPrice Elasticity of Demand (2 of 2)
Base Pricing Strategies market share.
Market Introduction Pricing (skimming and penetration)
Value-Based Pricing (EDLP)
Adjusting Prices in Consumer Markets
Price BundlingPricing Strategies (1 of 2)
Adjusting Prices in Business Markets market share.
Discounts and allowances
Barter and countertrade
Price discriminationPricing Strategies (2 of 2)
Pricing levels in a negotiated pricing situation: market share.
Guidelines for making concessions:
Avoid being the first side to make a concession
Start with modest concessions and make them smaller as you proceed
Avoid making concessions early in the negotiation
Do not give up anything without something in returnFixed vs. Dynamic Pricing
Price Discrimination market share.
Deceptive PricingLegal and Ethical Issues in Pricing
Beyond the Pages 8.2