Notes

POINTERS TO REVIEW PRICING STRATEGY


CRITERIA FOR EVALUATING PRICING METRICS

Tracks with differences in value across segments.
Tracks with differences in cost to serve.
Is easy to measure and enforce.
Facilitates favorable positioning versus competition.
Aligns with how buyers experience value in use

TWO DIMENSIONS THAT FRAME A COMMUNICATION STRATEGY-

The type of value delivered—economic or psychological; and (ii)


the degree of buyer involvement—do they actively seek information to make detailed comparisons or do they make a decision based


TYPES OF CUSTOMERS-

discount
loyal
impulse
need-based
wandering

REFERENCE PRICING-

Price which users compare with the price of a competitor’s product or previously advertised price.


COMPETITIVE REFERENCE PRICES-

Conceptually, identifying the next-best competitive alternative is simply the answer to “If I, the seller, did not exist, what would my customer do?” Yet the work identifying the next-best competitive alternative and gathering accurate reference prices offers a number of challenges that often trip up pricing strategies.


VOLUME DISCOUNTS-

Is a price reduction offered to buyers who purchase bulk quantities. Producers or sellers are able to reduce inventories and take advantage of economies of scale by allowing discounts to bulk buyers.


PRIORITY PRICING-

The users pay according to the quality of service chosen by them.


PEAK PRICING-

The practice of charging higher prices for goods or services during times of high demand, while off-peak pricing refers to the practice of charging lower prices during times of low demand.


ECONOMY OF SCALE-

The relationship between the size of a plant or industry and the lowest possible cost of a product. When a factory increases output, a reduction in the average cost of a product is usually obtained.


PRICING METRICS-

When a unit of measure changes and if your customer consumes or uses more of your product, they pay you more. If they consume or use less of it, they pay you less.


UNBUNDLING PRICING STRATEGY-

It means splitting an offer into multiple smaller offers. Bundling and unbundling help create value for different customers without having to create something new.


PRICE BUNDLING-

Is a pricing strategy where two or more complementary products are sold together for a price that’s lower than what the products would have cost individually. The discounted price motivates consumers to buy the bundle because it’s a better deal than buying them separately.



COST-

Is the value of money that has been used up to produce something or deliver a service, and hence is not available for use anymore.



PRICE-

The amount that customers will be willing to pay for a product. Marketers must link the price to the product’s real and perceived value, while also considering supply costs, seasonal discounts, competitors’ prices, and retail markup.


TOTAL ECONOMIC VALUE-

the maximum price that a smart shopper, fully informed about the market and seeking the best value, would pay.


PEAK ECONOMIC VALUE-

As applied to economics and finance, a peak represents the high point in a business or financial market cycle.


TOTAL MONETARY VALUE-

Resents the total cost savings or income enhancements that a customer accrues as a result of purchasing a product.




MONEY-

Any item or verifiable record that is generally accepted as payment for goods and services and repayment of debts, such as taxes, in a particular country or socio-economic context.


COST PLUS PRICING-

a pricing strategy by which the selling price of a product is determined by adding a specific fixed percentage to the product's unit cost.

CPP = BE x PMG


SHARE DRIVEN PRICING-

The seller makes a decision based on the prices of its competition. It also focuses on determining a price that will achieve the most profitable market share and does not always mean the price is the same as a competition, it could be slightly lower.


CUSTOMER DRIVEN PRICING-

A pricing strategy in which a company sets prices according to the customer's perceived value of its product and services.


VALUE PROCESS-

It focuses on how the process involving a service provider and its customers leads to value for customers in the service context.


VALUE COMMUNICATION-

It can have a great effect on sales and price realization when your product or service creates value that is not otherwise obvious to potential buyers. The less experience a customer has in a market or the more innovative a product ‘s benefits, the more likely it is that the customer will not recognize nor fully appreciate the value of a product or service.


VALUE CREATION-

Essential base to support a profitable and lasting business.

giving out something of worth to receive something of higher worth.
Price should match the perceived value of the item you are purchasing.

VALUE BASED PRICING-

Allows the seller to increase their price at the highest level that customer will be willing to pay.

A value-based pricing strategy is when companies price their products or services based on what the customer is willing to pay. Even if it can charge more for a product, the company decides to set its prices based on customer interest and data.

VALUE PRICING-

can allow a seller to increase the price of an item to the highest level that customers will be willing to pay.


PRICING-

the process whereby a business sets the price at which it will sell its products and services


VALUE-

The term value refers to the total savings or satisfaction that the customer receives from the product. Economists refer to this as use value or the utility gained from the product.


MONETARY VALUE-

The amount that would be paid in cash for an asset or service if it were to be sold to a third party.

Most important element of business to business purchase.

PRODUCT VALUE-

is the benefit that a customer gets by using a product to satisfy their needs, minus associated costs.


PRESENT VALUE-

the current value of a future sum of money or stream of cash flows given a specified rate of return.


PSYCHOLOGICAL VALUE-

refers to the many ways that a product creates innate satisfaction for the customer.


PSYCHOMETRIC VALUE-

the characteristics that express its adequacy in terms of reliability, validity, and responsiveness.