...Pricing Strategy: Ecaterina Curova Jason Geesey LCC International University November 13th, 2013 Pricing Strategy: Pricing is the moment of truth; it is when all of the company’s marketing and financing strategies really meet the final decision point with its customers (Kotler & Armstrong, 2012, p.314-315). “One of the key aspects of getting the financial control of the business is developing a pricing strategy for its particular market so the product or service can be sold properly” (“Developing a Pricing Strategy for Your Business,” 2010). If a company has a good pricing strategy for the financial basis and a good marketing strategy than it is very easy to sell the product (“Developing a Pricing Strategy for Your Business,” 2010). There are two ways of pricing the product or service in the market: value-based pricing and cost-based pricing. Value-based pricing is looking on how customers value the product and is basing the price on that (Kotler & Armstrong, 2012, p.315). If a medical engineer has a pill that costs him a dollar to make, however, it can cure cancer, customers are going to pay him a lot more money than one dollar for it. Businesses look at what value people put on their product and price it accordingly. On other side there is a cost-based pricing which looks at how much money a company has to spend to make their product and bases its cost on that (Kotler & Armstrong, 2012, p.319). There are a lot of different pricing strategies that are connected...
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...Pricing Strategy How much should you charge for your product or service? One of the most difficult, yet important, issues you must decide as an entrepreneur is how much to charge for your product or service. While there is no one single right way to determine your pricing strategy, fortunately there are some guidelines that will help you with your decision. Before we get to the actual pricing models, here are some of the factors that you need to consider: • Positioning - How are you positioning your product in the market? Is pricing going to be a key part of that positioning? If you're running a discount store, you're always going to be trying to keep your prices as low as possible (or at least lower than your competitors). On the other hand, if you're positioning your product as an exclusive luxury product, a price that's too low may actually hurt your image. The pricing has to be consistent with the positioning. People really do hold strongly to the idea that you get what you pay for. • Demand Curve - How will your pricing affect demand? You're going to have to do some basic market research to find this out, even if it's informal. Get 10 people to answer a simple questionnaire, asking them, "Would you buy this product/service at X price? Y price? Z price?" For a larger venture, you'll want to do something more formal, of course -- perhaps hire a market research firm. But even a sole practitioner can chart a basic curve that says that at X price, X' percentage will buy,...
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...Appropriate Price Strategy Price strategy is an essential and most vital element that is involved in the marketing process. Pricing a product to low would affect the bottom line negatively. On the other hand if the price of a good or service is too high, then nobody will purchase them. The key is to research and compare all available pricing strategies and choose which the best one for a particular situation. Prices have always been the center of human interaction ever since traders have been in existence. It should come to no surprise that all companies in different industries spend countless time figuring out how to price their products and services competitively. Examining factors that may impact the development of our marketing strategy may require an assessment of a variety of factors in which includes a market analysis as well as an analysis of the Eaton’s position of the brand within the market. Being able to determine the appropriate marketing mix for the Eaton tablet will define how the product will be viewed by others that are looking in. The marketing mix will be consisted of a definition to what exactly the Eaton tablet does and how it will help optimize employee capabilities at the same time lessen the consumption of paper and employee communications. Determining the appropriate marketing mix for the Eaton tablet would consist of defining exactly what the tablet does and how it can be incorporated to every business out there to get the same output. Developing a...
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...value addition does not stop there, there is going to be adequate staff to cater for the large number of customers expected. This will help to ensure that the customers will not have to wait longer than their meal takes to prepare, hence maximum customer service is ensured. The restaurant is set to benefit the common or the average citizen, which is to mean that prices will be set in a way that they are affordable to that target group. The prices in this kind of restaurant are always medium and this restaurant is no exception. I have adopted a cost-plus pricing strategy to cater for all the dishes to be included in the menu which I found to be the best and one I will be guaranteed of profits (Smith, 2012). This pricing policy is the best because before coming up with the final price for a unit of output, it takes into account various overhead costs such as the rent, wages for the staff and the power used in the rooms. The strategy also considers the profit margins which ensures the restaurant is kept in operation (Smith, 2012). The percentage of the cost and the margins will be combined in order to give a comprehensive percentage that will be used to determine the price of every food item to be sold. This policy also is beneficial to customers because it ensures that they are not exploited and that the business remains...
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...Pricing Strategy for Wellness, Inc.Prepared by Marlowe K. Blackwell | How can Wellness, Inc.best use Price Discrimination to increase revenue? | This document will identify, compare and analyze various pricing models currently used by competitors and recommend a pricing strategy for Wellness, Inc. to increase revenue and maximize profit. | 8/12/2013 8/12/2013 Outline 1. Introduction 2. Background of Wellness, Inc. a. Type of business b. Market segment 3. Background of Industry 4. Wellness, Inc.’s current pricing model 5. Comparison Competitor pricing models: c. Massage Envy- two part tariff d. Rubs – two part tariff e. Massage Goat – third degree f. Massage Retreats–second degree 6. Recommended Pricing Strategy for Wellness, Inc. 7. Next Steps Introduction Wellness, Inc., Inc., WELLNESS, INC., is a massage and wellness studio with one treatment room located within Salon 101. WELLNESS, INC. is differentiated from other spas and massage therapist in the Milton and Pensacola area based on being the only Ayurvedic Massage therapist in the area and offering natural and organic products. Salon 101 is a busy hair salon with six hair stylist offering hair care and one dedicated nail technician and two hair stylists that offer nail services. Salon 101 client segment is primarily female clients with incomes of $60,000 or less with approximately 20% with income above this bracket. WELLNESS,...
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...Assignment #1 Posted by Ge Gao at Saturday, July 7, 2012 1:49:33 PM CDT 1. Are you influenced by coupons and promotions? Does it change your buying patterns? How does it influence your perception of value? Yes, I’m influenced by coupons and promotions. It does change my buying patterns. I would buy some products for the future or products I don’t need. It makes me feel that if I spend time on looking for coupons and promotions, I can get those products at a lower price. I think I can pay less to get the same value, or get a higher value than what I pay by coupons and promotions. 2. Ron Johnson had a successful track record at Target and Apple. Are the questions around his new pricing strategy for Penney premature? JC Penney is trying to find a customer segment that is not entirely focused on price and deliver a different experience to them. But the problem is that JC Penney is currently a “me too” retailer, with nothing unique to offer. They are selling to a customer segment that is trained to look for the cheapest deal and their products don’t possess the differentiation to take consumer’s focus off its price. When selling a relatively undifferentiated product, it is hard to convince customers to pay more than what a lower priced competitor might offer. Differentiation is a key to avoiding steep discounts, and for JCP it seems pre-mature to offer lower prices when products are not differentiated. That differentiation can come from products or from the service in...
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...Table of Contents Introduction..............………………..………………………………...2 Pricing Strategy.............................…….………..…………………… 2 Non-price Barriers to Entry...……………..…...…………….……… 3 Ideas for Product Differentiation...……..………..……….………… 3 Markets………………….……………..................................………… 4 Profit Maximization.............................................................................5 Loss Minimization...............................................................................6 Conclusion..........................................................................................7 Introduction Larson Inc. must be able to adapt to the economic changes in the market to remain competitive. The needs of consumers will constantly change as well as economic conditions for the countries in which they operate in. The company must examine their pricing strategy, non-price barriers, product differentiation and costs to remain a successful international company. To do this, the management must take an active role in the decision making for the company. First, the company must be able to identify the market in which they are currently operating in. This will help Larson Inc. determine how to change their pricing strategies to meet their organizational goals. The different departments can work as a team to make recommendations to the management on their non-price barriers to entry and the product differentiation based on the current market. All of these factors will...
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...EXECUTIVE SUMMARY As we already are aware the Pricing strategy is one of the Marketing Mix’s “Four Ps” along with the Product, Promotion and Place strategy. In this article is described more specifically how different pricing policies are viewed from the customers as well as the considerations lying behind of a low price. Moreover, the article describes the association between each strategy with the pricing strategy and how the combination influence different outcomes. To conclude, the article along with the illustration of those strategies makes a linkage between them and the Total Customer Value. THE LEARNING LESSONS FROM THIS ARTICLE 1) Organizations should pay equal attention to both Four” P’s” strategies and do not focus solely in the pricing strategy, since all these components are of great value as long as the firm knows how to take advantage properly. However, small/medium sized businesses mostly of the time relies on the pricing strategy as they think that price is the most significant point of reference of how customers and competitors view them in the market. 2) Firms should find such equilibrium in their pricing strategy, nor too high or nor too low. This price should reflect the value proposition of the firm, which should be consistent, and, therefore support its business model. If a company places the price too high, automatically makes the product unaffordable for the majority of people, therefore luck potential for huge growth. On the other hand...
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...Pricing Strategies and Marketing Channels Introduction Pricing Strategies and Marketing Channels are essential to the success of the health care system today. The role of pricing is to give the product or service its image. A health care facility that has quality products and services has to make sure that they also have a good pricing mix to attract new customers and to appeal to its customers loyalty. In today's society, customers are beginning to be sensitive to pricing of products and services because of the economic change. With the rise in prices, loss of employment and the health insurances issues on the minds of citizens in the United States, many are now searching for the best service or product that they can obtain for less. This paper will display the importance of pricing strategies and the use of intermediaries in the health care system. It. will explore the concepts of pricing strategies and marketing channels and their relevance to the health care system. Explain at least four of the seven steps for setting an initial price for a product or service, In the past, many physicians, customers and health care professionals thought it to be unethical and unprofessional to market the sales of health care products and services (Kreidler, 2008). The following will addresses how the health care facility can be successful in marketing its products and services. :These next four steps will show the importance of price setting. Selecting the Pricing Objective...
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...• Before we take up on any strategy we should look at the bigger picture and see how our product fits in the market. What value or need is it satisfying. • Eliminate the segments that will not buy the product o Match the value drivers of the customer against the product - exclude price --> by doing this we are looking for customer who can potentially buy the product. This is called the broad horizontal segment. o Divide the horizontal segment into different vertical segments according to their price sensitivities. o Set a price by targeting segments in order to maximize profits • Value of the product to the customer EVC = reference price + value (product - reference) • This is the highest price that a company can charge for the product How do I find refernce product? • Look for an alternative that a customer is currently using. Look for a similar product that is in close competition with the product eg land rover and jeep • Look for a product that serves the same function as the target product eg calculators and slide rules • None of the above • Assumption - the competitor will not change the price if our product enters the market • WTP of the customer This is between the variable cost and EVC Sometimes consumers are not aware of the added value so if a price is too close to EVC customer will not buy it. We need to educate customer s about the values In case of high switching costs the product should be priced low to offset the switching costs •...
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...PRICING METHODS 1. MARKUP PRICING: - This method is to add a standard markup to the product’s cost. Construction companies submit job bids by estimating the total project cost and adding a standard markup for profit. Lawyers and accountants typically price by adding a standard markup on their time and cost. Unit cost = Variable cost + Fixed Cost Unit sales Markup price = Unit cost 1 – Desired return on sales 2. TARGET- RETURNS PRICING: - In target return pricing, the firm determines the price that would yield its target rate of Return On Investment (ROI). General Motors has priced its automobiles to achieve a 15% to 20% ROI. Target – returns price = Unit Cost + Desired return * Invested Capital Unit Sales 3. PERCEIVED- VALUE PRICING: - An increasing number of companies now base their price on the customer’s perceived value. Perceived value is made up of several elements, such as the buyer’s image of the product performance, the channel deliverables, and the warranty, quality, customer support, and softer attributes such as the supplier’s reputation, trustworthiness, and esteem. Companies must deliver the value promised by their value proposition, and the customer must perceive this value. The key to perceived value pricing is to deliver more value than the competitors and to demonstrate this to prospective...
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...Table of Contents 1. The Need for Pricing 2. Pricing Software Industry Products 3. Licensing 4. Pricing Discrimination 5. Bundling 6. Other Pricing Issues 7. Summary The Need for Pricing Pricing has far reaching effects beyond the cost of the product. Pricing is just as much a positioning statement as a definition of the cost to buy. Price defines the entry threshold: who your buyers are and their sensitivities, which competitors you will encounter, who you will be negotiating with and what the customers’ expectations will be. Good pricing will remove the price issue from being an obstacle to a sale. Pricing is also used as a weapon to fight the competition as well as gray markets. Pricing is unique from other marketing decisions for several reasons: • Price is the only marketing element that produces revenue. All other marketing decisions produce costs. • Pricing is the most flexible marketing decision. • Pricing reflects a product's strengths and weaknesses. It implies value as well as positioning. • Pricing has the most immediate impact on the bottom line. In the high tech industry, a 1% increase in prices can lead to a 10% (or more) increase in profit. This is twice the effect that the same change in volume, fixed or variable costs have on profits. Pricing Software Industry Products When it comes to Pricing Software, “Economics 101” is not applicable. There are many reasons for this: 1. Supply and Demand curves are based on the assumption...
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...Channel and Pricing Strategies MKT/571 May 31, 2012 Understanding various markets and strategies when dealing with the launch of a new product can be challenging. Below is a breakdown of the channel strategies, pricing strategies, and environmental factors. In addition, the government and economic factors, innovation and technology, and the demographics of the new product are factored in the plan for the launch. Channel Strategies Most manufacturers do not sell their goods directly to the final consumer. Between the final consumer and the manufacturer stands a group of intermediaries who perform various functions. The intermediaries are referred to as marketing channels, groups of interdependent organizations involved in the process to help make a product or service available for consumption or use, marketing channels (Kotler, & Keller, 2007). Every manufacturer needs a marketing strategy in order to promote their product and make it readily available to the public. So choosing the correct strategy is a critical decision facing management. Apples launch of the new mini iPad will need two channel strategies, one for their domestic market (U.S.A), and one for their international market (Japan). Since the product is new choosing the correct market is crucial for the success of the mini iPad. Apples reputation in their domestic market is one of high brand loyalty. Apple has many brand loyal customers that demand Apple products and choose to...
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...airlines use different pricing strategies as part of the overall business strategy. A couple of the relevant pricing strategies are discount pricing, segmented pricing, and geographical pricing. Geographic pricing is a standard approach. Certain locations are charged certain prices. Generally the main routes are cheaper and the more remote locations are more expensive. This is due to the costs are higher the fewer people that are on the aircraft. Delta uses the hub system. Atlanta Georgia is the main hub for Delta. Tickets should be cheaper flying into Atlanta than some of the more remote locations from there. Discount pricing is offering a discount for the same seat. One discount Delta offers is the basic economy fare feature. A ticket is bought online but a seat is not assigned until showing up to check in which allows for the cheapest ticket but there is no guaranteed seat. Segmented pricing is also used to change the price of the ticket at different times throughout the season or throughout the day. Generally the tickets are cheaper at the odd hours. Very early or very late flights are cheaper than a 0900 flight. This is due to the higher demand for the 0900 flight. Delta is currently offering deals on travel due to the summer. Flights to Europe start at $887 round trip or a trip to Alaska costs from $99 (Delta, 2015a). This is to entice the customer looking for somewhere to go to book a ticket with Delta. The price strategy is taken into the business strategy by changing the price...
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...The ethical dilemma in Fingerhut’s pricing strategy was whether the company really exploited lower income individuals. Most people’s perspectives towards the company’s pricing strategy looked both unethical and deceptive. They thought Fingerhut was targeting and taking advantage of those of a selective group of lower income individuals with poor credit history and that the advertisements looked misleading, and their installment plans yield a false sense of the ability to afford certain market products. Many consumers also felt they were backed into a corner where they were forced to pay outrageous inflation prices for products that were well out of their price range to begin with. Things have been said about Fingerhut being highly unethical to take advantage of a group of individuals that don’t have the financial means to enter a transaction to begin with so that the company could be very profitable. The real question to be asked is- is it the company’s fault for choosing this price strategy? Is it the company’s fault for being too manipulative? Is it the company’s fault that people still choose to buy over and over again? Overall did they really exploit the low income individuals/families with their marketing strategy? However, in my view, Fingerhut was acting ethically because they were doing business in a capitalist way and still managed to do socially responsible acts. Fingerhut’s CEO, Ted Deikel was mainly following his procedures under capitalism which was to conduct its...
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