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Pricing decisions week 8


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Pricing decisions week 8

  1. 1. Pricing DecisionsWeek 8 Ch 10
  2. 2. Pricing Decisions Pricing is important factor as it directly relates to the product positioning. When a product is positioned incorrectly it is subjected to unfair competition. Businesses make strategic decisions regarding pricing in order to meet their organisational objectives. Businesses consider internal and external elements when price setting The right price, pricing strategy that meet both organisational objectives and needs of customers.
  3. 3. Price Setting Business need to consider when price setting1. Value based Pricing= Centralises the perception and values of customer i.e value ofsoft drink at football game as opposed to supermarket.1. Good Value pricing= Combines quality and services at a price customers perceive asfair i.e a lower priced alternative product to an existing product oradding extra quality at same value1. Value added pricing= focuses on increasing the features that are valued by customerand pricing accordingly, this eliminates competition based onprice, poor marketing strategy
  4. 4. Factors which affect Pricing Internal Factors= Marketing objectives, marketing mix strategy, costs, the organisationExternal Factors= Nature of the market and demand for product, competitor prices affectother businesses, economic factors (economic state, government policiesand laws)Monopolistic competition – able to differentiate product therefore prices differ Oligopolistic Competition – small number of sellers and are influenced strongly by what competitors are doing in the market. Monopoly market – only one seller who is not subjected to competition
  5. 5. New Product Pricing Strategies There are two widely accepted strategies for pricing1. Market-skimming= Setting a premium price at the initial stage – effective whenthere is demand for the product and product has qualitydeserving of the price1. Marketing penetration Pricing= Attracts more buyers and increase overall market share,Lower prices but quantity of sales can enable the business tooffer the lower price and remain profitable
  6. 6.  Price elasticityHow sensitive the demand for a product is in relation to price changes. Inelastic when [product is unique or a specialty product Elastic where products are of a lower quality or available alternatives are easily accessible
  7. 7. Product Mix Pricing Strategies Pricing Strategies for Product Mixes include1. Product Line Pricing2. Optional Product/service pricing3. Captive Product Pricing4. By-product pricing5. Product-bundle pricing
  8. 8. Price Adjustment Strategies Are important when there is some change to consumer trends or the buying situationExample: discounts and allowances might be appropriatewhen end of season stock is needed to be sold.Segment Pricing = price changes for different customersregular customer might pay difference cost than onlinecustomers.Psychological Pricing = altering pricing perception thatcustomer holds. Example: advertising $19,999 than $20,000appears less when not.
  9. 9. Other Price adjustment Strategies Promotional Pricing – discounts etc Value Pricing – combining quality and service Geographic pricing – absorbing or adding on transport costs to customers in remote areas International Pricing – prices changes for exporting goods