What is the purpose of price management?
Adjust the price to affect demand
What is the key of price management?
Customers’ perceived fairness
What is a reference transaction?
How customers think the transaction should be conducted
What is a reference price?
How much customers think the transaction should cost; reference price may come from market prices, posted prices, and the last price paid
What is interpersonal fairness?
Discriminatory pricing that is perceived as “unfair” among customers can generate a tremendous amount of negative emotion and ill will and is unrelated to customer service
What is dual entitlement?
Consumers believe that they are entitled to a reasonable price and firms are entitled to a reasonable profit.
How can you influence the reference transaction?
How can you influence the reference price?
Set up a higher rack rate
Offer low price with restrictions
What are the five types of price positioning?
What is Skim?
Status indicating quality products. Charge the highest price customers will pay. Price lowers gradually following the demand curve to “skim off” the higher-paying customers
What is Match?
When you are a little better than your competition set one rate to match and another slightly higher
What is Undercut?
When your competition is a little better than you offer a price to match and another slightly lower
What is Penetrate?
A price war to gain market share. Rates set lower than competitors. Only works at the growth stage