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35 Cards in this Set
- Front
- Back
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Cost-based pricing |
Gives an indication of the minimum price to make a profit Takes fixed and variable costs into account |
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Cost-based pricing Full cost pricing |
Total production costs + Selling and administration costs + Markup / Number of units expected to sell - can lead to price increase if sales fall - sales estimate is made before the price is set = illogical |
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Cost-based pricing Marginal cost pricing |
Prices to cover direct costs plus a contribution to overheads |
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Cost-based pricing Cost-plus pricing |
Calculating the cost of manufacture including distributed overhead cost and R&D costs Then adding in a fixed percentage profit |
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Cost-based pricing Mark-up pricing |
Adding on a fixed percentage to bought-in stock |
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Competitor-oriented pricing |
Following the prices charged by leading competitors or Producers take the going-rate price or Contracts are awarded through competitive bidding |
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Competitor-oriented pricing Going-rate price |
When all competitors receive the same price because it is the going rate for the product |
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Predatory pricing |
Pricing below the cost of production in order to bankrupt the competition |
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Market-led pricing |
Focuses on the value that customers place on a product in the marketplace |
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Market-led pricing Trade-off analysis |
Measurement of the trade-off between price and other product features |
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Market-led pricing Experimentation |
Puts a product on sale at different prices in different areas |
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Market-led pricing EVC analysis |
A high economic value to the customer means that it can sell at a high price and still offer superior value compared to the competition |
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Positioning strategy |
Influences price-setting decisions. Price can be used to convey a differential advantage and to appeal to a certain market segment (positioning) |
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New product launch strategy |
Influences price-setting decisions. Marketing strategies based on combinations of price and promotion |
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New product launch strategy Rapid skimming strategy |
High promotion and high price |
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New product launch strategy Slow skimming strategy |
Low promotion and high price Low promotion because i.e - word of mouth is more important - heavy promotion is incompatible with product image |
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New product launch strategy Rapid penetration strategy |
High promotion and low price |
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New product launch strategy Slow penetration strategy |
Low promotion and low price |
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Product-line strategy |
Influences price-setting decisions. To take into account of where the price of a new product fits into its existing product line |
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Competitive marketing strategy |
Influences price-setting decisions. The pricing of products should be set within the context of the firm's competitive strategy. Strategic objectives that are relevant to pricing: - build -hold - harvest - reposition |
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Competitive marketing strategy Build objective |
Price lower than competition |
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Competitive marketing strategy Hold objective |
Maintain or match price relative to competition |
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Competitive marketing strategy Harvest objective |
Set premium prices |
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Competitive marketing strategy Reposition objective |
Price change |
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Channel management strategy |
Influences price-setting decisions. When products are sold through intermediaries such as distributors or retailers , the list price to the consumer must reflect the margins required by the distributors |
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International marketing strategy |
Price escalation: pressure on firms to increase the prices in other countries Parallell importing: when products are re-imported back to the home market and sold through unauthorized channels at a low price |
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Managing price changes Circumstances which may lead a company to raise or lower prices |
Increase price when: - value is greater than price - rising costs - excess demand(hög efterfrågan) - harvest objective Cut price when: - value is less than price - excess supply(utbudsöverskott) - build objective |
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Managing price changes Tactics |
Increase price: - price jump - staged price increases - escalator clauses - price unbundling - Lower discounts Cut price: - price fall -staged price reductions - price bundling |
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Tactics Price unbundling/bundling |
Bundling: Combining several products into a single comprehensive package in a single price i.e. McDonalds Happy meal Unbundling: Breaking something into smaller parts i.e. Ryanair letting you may for every small part of the flight |
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Managing price changes Reacting to competitors' price changes, When to follow: |
Increases: Rising costs, excess demand, price-insensitive customers, price rise compatible with brand image, harvest or hold objective Cuts: falling costs, excess supply, price-sensitive customers, price fall compatible with brand image, build or hold objective |
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Managing price changes Reacting to competitors' price changes, When to ignore: |
Increases: stable or falling costs, excess supply, price-sensitive customers, price rise incompatible with brand image, build objective Cuts: Rising costs, excess demand, price-insensitive customers, price rise compatible with brand image, harvest objective |
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Managing price changes Reacting to competitors' price changes, Tactics |
Quick response: increase: margin improvement urgent cuts: offset competitive threat Slow response: increase: gains to be made by being friend cuts: high customer loyalty |
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Customer value through pricing Cost management |
Cost control is critical for firms that attempt to lead on price as their success in controlling costs has a direct impact on profit margins |
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Customer value through pricing Yield management |
Monitoring of demand or potential demand patterns. Hotels and travel |
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Customer value through pricing Dynamic pricing |
Prices adjusted continually, based on demand and potential demand. Ryanair |
