3.13 Pricing Strategies

define price

amt paid by customer for good/service

what determines if price should be higher and still have good sales?

PED

Factors When Setting Prices
1.      M__ c__: what are consumers willing to pay?

2.      P__ costs: what are the unit costs of production?

3.      Market s__: how fierce is comp.?

4.      Business o__: max profit or max sales?

market conditions, production, structure, obj

Factors When Setting Prices
5.      T__/s__: GST, customs = ↑price; subsidies = ↓prices

6.      T__ of product: is it rare? Are there subs? Is it specialised/technological?

7.      T__ market: who’s buying? Do they have bargaining power over price?

8.      4P’s: decline stage = ↓price

9.      Brand i__

taxes/subsidies, type, target, image

Pricing Strategies
1.      C__-p__ pricing: calculate costs of p__, then add f__ % markup
>   GOOD: c__ covered, e__ to calculate
>   BAD: not f__, doesn’t take market c__ into account

2.      C__ pricing: basing price around r__
>   GOOD: f__, know if rivals are undercutting you, be ‘h__ quality’ if price > rivals
>   BAD: may not always cover costs, price always c__, ‘l__ quality’ if price < rivals

cost-plus, production, fixed, costs, easy, flexible, conditions, competitor, rivals, flexible, high, changing, low

Pricing Strategies
3.      C__ pricing: covering v__ costs (changes w/ vol.) + f__ costs
>   GOOD: f__, good if you have a range of d__ products
>   BAD: may not cover all fixed costs, a__ customers if price keeps changing

4.      P__ pricing: l__ price entering market (raised later)
>   GOOD: attracts new c__/steal from rivals, builds brand l__
> BAD: not sustainable l__ term, customers can leave if ↑price

contribution, variable, fixed, flexible, diff, annoys, penetration, low, customers, loyalty, long

Pricing Strategies
5.      Price d__: based on how much diff. g__ are prepared to pay
>   GOOD: m__ revenue
>   BAD: customers leave if r__ aren’t using this method

6.      Price s__: h__ price e__ market (lowered later)
>   GOOD: reputation for high q__ product, max revenue
> BAD: too high = n__ sales, ↓price = customers feel r__ off, product seen as low quality

discrimination, groups, max, rivals, skimming, high, entering, quality, no, ripped

Pricing Strategies
7.      P__ pricing: influence consumer e__ by making product feel cheaper e.g. $9.99
o   GOOD: attracts customers without reducing r__
o   BAD: may look c__/low quality

8.      P__/destructive pricing: temp. very l__ price, reducing c__ (ILLEGAL)
o   GOOD: ↑s__, ↑brand l__
o   BAD: may look cheap/l__ quality, customers may leave if ↑price, ILLEGAL

psychological, emotions, revenue, cheap, predatory, low, comp, sales, loyalty, low

Price Wars
> when r__ firms repeatedly cut p__ to gain ↑market s__

rival, prices, share