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General pricing approaches
- Cost plus pricing
- Break-even analysis and target profit pricing
- Value-based pricing
- Competition-based pricing
- Relationship pricing
Cost plus pricing
- The simplest method
- Cost-plus pricing is adding a standard mark up to the cost of the product.
Target profit pricing
Uses break-even pricing and add a target profit.
Uses buyers' perceptions of value, not the seller's cost, as the key to pricing. Non price variables in the marketing mix are used to build up perceived value. Price is set to match perceived value.
- Economic-value pricing
- Going-rate pricing
New product pricing strategies
- Market skimming
- Market penetration
Setting a high price for new products to maximise profit. eg fashion
Setting a low price for a new product to attract a large number of buyers and gain a dominant market share. e.g some new consumer pharmaceuticals
Producut mix and service mix pricing
- Product/service-line pricing: (99, 129, 149)
- Optional product/service pricing: (offer additional 1 yr warranty etc)
- Captive product/service pricing: Printer ink, razors
- By-product pricing: Petrol
- Product/service-bundle pricing: XBox bundle
- Discount pricing and allowances
- Cash discounts (pay in cash)
- Quantity discounts
- Functional discounts
- Seasonal discounts (winter stock)
Price indicates something about the product. Many consumers use price to judge quality. In psychological pricing the seller considers the psychology of prices and not simply the ecnomics.
Below list price and sometimes even below cost.
starts with the customer and the benefits the product creates relative to key competitors.
Is a decision about how to price products to different customers in different parts of the country.