PRICING STRATEGIES

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PRICING STRATEGIES

MAJOR Pricing Strategies

Cost-Based Pricing

Cost-based pricing setting prices based on the costs for producing, distributing, and selling the product plus a fair rate of return for effort and risk

Break-even pricing is the amount of money, or change in value, for which an asset must be sold to cover the costs of acquiring and owning it

Cost-plus pricing adds a standard markup to the cost of the product

Total costs are the sum of the fixed and variable costs for any given level of production

Variable costs are the costs that vary with the level of production

Fixed costs are the costs that do not vary with production or sales leve

Customer Value-Based Pricing

Uses the buyersʼ perceptions of value, not the sellers cost, as the key to pricing

High-low pricing charging higher prices on an everyday basis but running frequent promotions to lower prices temporarily on selected items

Value-added pricing attaches valueadded features and services to differentiate offers, support higher prices, and build pricing power

Everyday low pricing (EDLP) charging a constant everyday low price with few or no temporary price discounts

Good-value pricing offers the right combination of quality and good service at a fair price.

Competition-Based Pricing

Consumers will base their judgments of a productʼs value on the prices that competitors charge for similar products

Setting prices based on competitorsʼ strategies, costs, prices, and market offerings

Strategies

Price adjustment

Segmented pricing

Psychological pricing

International pricing

Dynamic pricing

Geographic pricing

Promotional pricing

Discount and allowance

Product mix

Product bundle

By-product

Captive product

Optional product

Product line

Skim & penetrate

fundamental aspects

Relevant facts for pricing

Product Costs

costs that are those directly related to the production of a product or service intended for sale

Marketing Strategy, Objectives and Mix

Market and Competition

Customer Perceptions of Value

Price

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Predatory pricing

Price maintenance

Price discrimination

Deceptive pricing

Price fixing

The price is the sum of all the values that consumers give up in order to gain the benefits of having or using a product or service