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    Cost-Based Pricing:: Pros: o Simple Easy To Use, Manage and Implement

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    Baraa
    The document discusses factors that affect pricing decisions, general pricing approaches, and types of pricing strategies. Key factors include internal considerations like costs and objectives, and external market conditions and competition. Common pricing approaches assess customer value and set prices relative to competitors. Types of pricing include cost-based pricing, value-based pricing, and market-based pricing. Price segmentation sets different prices for the same product based on attributes like customer type, location, or time period.

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    Cost-Based Pricing:: Pros: o Simple Easy To Use, Manage and Implement

    Uploaded by

    Baraa
    15 views3 pages
    The document discusses factors that affect pricing decisions, general pricing approaches, and types of pricing strategies. Key factors include internal considerations like costs and objectives, and external market conditions and competition. Common pricing approaches assess customer value and set prices relative to competitors. Types of pricing include cost-based pricing, value-based pricing, and market-based pricing. Price segmentation sets different prices for the same product based on attributes like customer type, location, or time period.

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    The document discusses factors that affect pricing decisions, general pricing approaches, and types of pricing strategies. Key factors include internal considerations like costs and objectives, and external market conditions and competition. Common pricing approaches assess customer value and set prices relative to competitors. Types of pricing include cost-based pricing, value-based pricing, and market-based pricing. Price segmentation sets different prices for the same product based on attributes like customer type, location, or time period.

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    Download as docx, pdf, or txt
    15 views3 pages

    Cost-Based Pricing:: Pros: o Simple Easy To Use, Manage and Implement

    Uploaded by

    Baraa
    The document discusses factors that affect pricing decisions, general pricing approaches, and types of pricing strategies. Key factors include internal considerations like costs and objectives, and external market conditions and competition. Common pricing approaches assess customer value and set prices relative to competitors. Types of pricing include cost-based pricing, value-based pricing, and market-based pricing. Price segmentation sets different prices for the same product based on attributes like customer type, location, or time period.

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    o Price: the value that a buyer exchanges for a good/service

    Factors affecting pricing decisions:

    o Internal:
     Marketing objective
     Marketing mix strategy
     Costs
     Organizational considerations
    o External:
     Nature of the market and demand
     Competition
     Other environmental factors (economy, resellers, government)

    General Pricing Approaches:

    o Asses what value your consumers place on the product/service


    o What should the appropriate process be?
     From company → to market place
     From marketplace → to company
     Looking at competitors

    Types of pricing

    Cost-based pricing:

    o Let’s recover our costs and make a profit


    o What it’s called: cost-based, markup, cost plus, target profit, ROI…
    o Adding a standard → MARKUP cost or sales → Break-even pricing

    Pros:

    o Simple → easy to use, manage and implement


    o Easily justifiable to buyers/ sellers

    Cons:

    o Unit or average cost varies with price → price affects volume and volume changes
    average cost; model is “circular”
    o Market/demand conditions never enter the model → what is your competitor’s price? Are
    you customers willing to the pay the amount?

    Value-based pricing
    o Price is based on buyer’s perceptions of value
    o Quantify consumer benefits relative to existing products

    Cost-based vs. Value-based

    Market-based

    o Make price at the same level, above or below competition


    o When demand elasticity is difficult to measure

    Cost-based vs. Value-based vs. Market-based

    Price adjustment strategies:

    o Discounts and allowances


    o Price segmentation
    o Geographic pricing
    o International pricing
    o Psychological pricing
    o Promotional pricing

    Price segmentation:

    o Two or more prices for the same product


    o Also known as: price customization, price discrimination, segmented pricing
    o Forget the following idea: “all customers are charged the same price”

    Basis for segmentation:

    o Customer, location , product form, time


    o To be effective:
     Market must be segment-able
     Fences that ensure “high” types pay higher price
    - Imposed fences: divide and identify customer type
    - Induced fences: self-selection mechanism
     No arbitrage
     Incremental revenue is bigger than cost of segmentation
     Must be legal
     No customer resentment/antagonism

    Price segmentation:

    Group Pricing

    o “Low” types identifiable


    o Some examples:
     Senior discounts
     Student discounts

    Location

    o WTP depends on location


    o Examples:
     Income differences → gas price in high income area vs. low income area
     Competitive differences → Starbucks at airport vs. non-airport

    Transaction cost

    o “Low” type has lower transaction (opp.) cost


    o Examples:
     Coupons
     Haggling

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