Class 9: Price and Value Flashcards
(38 cards)
Price- revenue generaiton
retail price: $79.99
how much is a customer willing to give us to acquire good or service!!!
Price is A COMPONENT OF VALUE
it is part of the marketing deifnitions
Price is one of the 4 P’s@!!!
- easiest to adapt to chanigng environment
- AN ATTRIBTUE OF PRODUCT!!! It is a proxy for missing information
Breakeven/floor price- left end of continuum
PRICE FLOOR- no profits beyond this price
MINIMUM price a company is willing to sell a product for!! this is the breakeven
Reservation/cilieng price- right end of continuum
PRICE CIEILNG: no demand above this price
max price a customer is willing to pay for a product
PRICE WHEN THE PRODUCT IS REMOVED FORM CONSIDERATION SET
cost based
competiiton based
value based prciing
this continuum needs to be highlighted!! very important slide
left to right on the continuum
cost based pricing
takes into consideration the p of place considering the intermediaries like distribution and selling
setting price based on the costs of producing/distirbuting/selling a product + a fair rate of return
-> Cost plus pricing: adding a stanadrd markup to cost of product [takes into consideration the p of place]
-> Marign pricing: setting price to make a specific return [takes into consideration the p of place]
Issues of costs based pricing
ignores cnsumers percepiton of value
ignores effect of competition
sellers moer concerned about their internal costs than demand!!!
pros of cost based prciing
consuemrs believe it is fair because there is no insane markup! and it identifies the floor price
value based pricing@@
price based on consumers perception of value rather than the sellers costs!!
Value= f(price, attributes, benefits, alternativeS)
value based prciing on exchange requirement
VALUE as seen by buyer > PRICE item is offerd for > COST to produce!!!
this is managing perceptions
how do you measure value for value based ppricing approahc?
price sensititvity analysis (van Westendorp)
Price Sensitivty Analysis questions
- At what point would you consider the product to be prcied so low that it cant be good quality?
- At what price is this item a bargain?
- At what price is this product starting to get expensive but you would still buy?
- at what price would the item be so expensive you would NOT buy it
too cheap, bargain, just right, too expensive
Via the PSA method, there is an optimal soliton
COnjoint analysis- method #2 for value based pricing approaches
-evaluating attribute and attribute levels AT THE SAME TIME!!!
- assessing utility
- the greater the RANGE for the utility points the more important the deicison is
two methods for value based pricing
- price sensitivty analsysis
- conjoint analysis
Competition based pricing
NOTHING TO DO WITH COST ND VALUE!!!! ITS ABOUT COMPETITIOS
- pricing based on external enviornment
3 ways to set price in comp based pricing
- penetartion: price lower than competiiton (competiitor has little market power)
- Parity/status quo: price at about the same as competition!!
- Skimming: price higher than competiiton (unique selling prop, differentiation, and project immage!!)
Psychology of price
price/quality relationship!!!
elements f price/quality relationship
- price as a proxy for quality: comparison of two products with info missing, people will select the higer price one
- price signaling: higher price= status
- even/odd presentation of price: od numbers= bargain, even= quality
ASSYMETRIC INFOF?
WHEN YOU have diff amounts of info of two products you are comparing
PRICE is used as PROXY for this! people will udnerstand higher price= quality
Reference price
standard against which a purschase price is compared (influenced by ads etc.)
-> can reuslt in sticker shock; if your price is much too high people may switch entirely
Reference shift
expecation of customers lower prices in volatile markets or due to constant promotion; reference price is unacceptable
Bundling
a package of products usually priced lower than the sum of the indivudal products
BECAUSE U THINK WOW THIS IS A BARGAIN
