CH 12

3 principle pricing objectives

-achieving target return on investment

-achieving market share goal

-meeting competition

achieving target return on investment

marketers tend to price the product hgher so that they can get enough revenue to cover the costs

achieving market share goal

the marketers tend to price the product lower so that the product or service can penetrate the market and achieve the higher market share

meeting competition

marketers have to adjust the price to meet the competition

other pricing obejctives

-maintaining channel relationships and product line considerations

the 3cs of pricing: customer based

1. customer based pricing where customer value = benefits - sacrifice

2. value based strategies

3. differentiating through value creation

its important for the company to differentiate from competitors on

both benefits and sacrifices

value based strats

answer the following questions

-what is the value of the solution

-how much is the maraket willing to pay

-can they deliver the service better at a lower price

differentiating through value creation

relationship building is important to enhancce customer value and loyalty. the marketers can emphasize unqiue add on benefits related to relationship building, such as building trust, demonstrating commitment, being flexible, and working on developing deeper relationships

the 3cs of pricing: cost based

-profit = price*quantitiy - cost

-price elasticity of demand

the 3cs of pricing: competitor-based

-closed (sealed) bidding

• open bidding

closed bidding

all bids from suppliers are open and contract will be awarded to the lowest bidder

open bidding

formal invitation that allows suppliers to make offers up to a certain date. prices may be negotiated in certain buying situations. normally happens when the specific requirements are hard to define

b2b pricing strategies

price skimming

penetration pricing

product line considerations

price skimming

refers to charging a high initial price and appropriate for very innovative products. provides a firm w opportunity to profitability reach market segments that aren’t price sensitive. allows marketers to capture early profits and enable innovators to recover high research and development costs quickly

penetration pricing

charging a very low initial price. works best when there is a high price elasticitiy of demand and there is strong threats of competition. the marketer can reach a large group of customers and gives a marketer an opp for a substantial production cost reduction as the sales volume expands

product line considerations

hard to balance prices in the product mix since both the demand and cost of individ cost are interrelated