Guidelines pricing


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Guidelines pricing

  1. 1. Guidelines For Better Pricing Decisions<br />
  2. 2. Guidelines<br />2<br />Pricing Management Principles<br />1. The more competitors know about your pricing the better off you are.<br />Try to create a positive sum game.<br />Communicate your intentions.<br />2. In highly competitive markets, focus on specific market segments to gain competitive advantage.<br />Shift from a product focus to a market focus.<br />
  3. 3. Guidelines<br />3<br />Pricing Management Principles<br />3. Pricing for new products should start as soon as product development begins.<br />Early identification of unprofitable ideas.<br />Develop product variations for specific segments.<br />4. Pricing decisions should be made within the context of an overall marketing strategy.<br />5. Successful pricing decisions are profit oriented, not volume or market share oriented.<br />Avoid using price as a competitive weapon.<br />
  4. 4. Guidelines<br />4<br />Pricing Management Principles<br />6. It is better to have a central organizing unit to set prices.<br />Avoid letting salespeople set price.<br />Control who has authority to reduce prices.<br />7. Prices should be set according to customers’ perceptions of value.<br />
  5. 5. Guidelines<br />5<br />Pricing Management Principles<br />8. The relevant costs for pricing are the incremental avoidable costs.<br />Avoid using average total or average variable costs.<br />Avoid unitizing fixed costs.<br />9. A price may be profitable when it provides for incremental revenues in excess of incremental costs.<br />Avoid using fully-allocated costs.<br />
  6. 6. Guidelines<br />6<br />Basic Rules For Pricing<br />These rules are intended to capture the analysis necessary to determine and evaluate pricing strategies. The order of presentation does not imply a hierarchy of importance; Each rule is important.<br />There is no one right way to determine price. Pricing simply cannot be reduced to a formula - there are too many interacting factors. Successful pricing requires considering all internal and external factors and adapting to changes as they occur.<br />
  7. 7. Guidelines<br />7<br />Basic Rules For Pricing<br />1. Know your objectives<br />2. Know your customers<br />3. Know your competitors and your market<br />4. Know your costs<br />
  8. 8. Guidelines<br />8<br />The Pricing Strategy Audit<br />1. Assess the consistency between corporate and pricing objectives.<br />A firm’s pricing strategy sends a message to the market. It provides customers an indication of the organization’s orientation.<br />2. Assess the relevant economics for the pricing decision.<br />A successful price setter must understand how pricing works.<br />
  9. 9. Guidelines<br />9<br />The Pricing Strategy Audit<br />3. Determine how your buyers perceive prices and form value judgments.<br />The essence of pricing is determining potential buyers’ perceptions of value for products and services.<br />4. Determine the relevant costs for the pricing strategy.<br />It is important for sellers to know the causes and behavior of costs in order to know how to manage the relative profitability of their offerings.<br />
  10. 10. Guidelines<br />10<br />The Pricing Strategy Audit<br />5. Determine the characteristics of each specific price decision.<br />Business firms have many different types of pricing decisions to make in addition to setting the basic list price.<br />6. Integrate specific price decisions into an overall strategy.<br />The prices of multiple product or service offerings must be consistent with the overall strategy and communicate the firm’s value statement.<br />
  11. 11. Guidelines<br />11<br />The Pricing Strategy Audit<br />7. Assess the administrative structure for managing the pricing function.<br />Managing the pricing function involves setting prices and determining when price adjustments should be made for selling in different quantities, to different types of dealers, in different locations, and for sales with different terms of payments.<br />8. Assess the effectiveness of price promotions.<br />Price promotions should be a part of the overall strategy, be monitored and controlled.<br />
  12. 12. Guidelines<br />12<br />The Pricing Strategy Audit<br />9. Analyze the legal aspects of the pricing strategy and tactics.<br />The legal aspect of pricing strategy is one of the most difficult parts of marketing strategy. It has left some people afraid of making pricing decisions, but often, at the same time, vulnerable to legal action.<br />10. Consider the implications of pricing in global markets.<br />Establishing price differentials in different national markets can lead to some unanticipated effects.<br />