Pricing in B2B Flashcards
What factors may support the pursuit of a pricing strategy?
Market size
Forecasted growth/decline
Significance of any learning effect (market knowledge)
Anticipated reaction by present or potential competitors
How persuasive the value proposition is
What are three C´s of pricing?
Cost
Competitors
Customer
Explain cost-plus pricing
Knowledge of own cost plus a percentage
Cost: Cost of goods, variable costs, and full cost
Plus: Suppliers target profit
Explain competitive-based pricing
Set price in relation to competitions prices
Supplier manager essentially give control of their marketing strategy to competitors
Suppliers largest market share usually provides leadership
Gauging how well competitors can respond to price reductions
Projecting the patterns of prices in the future
Explain customer based pricing
Need to understand the price elsticity of demand
Where demand is elastic, a price increase will reduce revenue and a price cut will increase revenue. Customers are responsive.
Where demand is inelastic, a price will increase revenue and a price cut will reduce revenue. Customer are non responsive
Explain Value-based pricing
Value that customers assign to a firms offerings might vary based on market segments
Some industrial products serve different purposes for different markets
Identifying applications where the firm has a clear advantage, understanding those advantages and their value
Means that the same product offering have different value to different customers
What are some pricing strategies for new products?
Penetrating pricing strategy
Overall profit earned by selling a larger number of units a lower profit per unit
Low initial price
Appropriate where there is high elasticity of demand, strong threat
Skimming pricing strategy
Overall profits earned by selling fewer units at a higher price
High initial price
Appropriate for distincly new products
