31. Marketing pricing policy. Demand-oriented, costs-oriented, competitive-oriented pricing strategies

Selecting the price objective/Determining demand/Estimating cost/Analyzing competitors’ cost, price /Selecting a pricing method/Selecting the final price

Pricing strategies:

1. Demand-oriented pricing

1. Skimming – setting the highest initial price for the product that customers really desire (ex: innovative product, introduction stage of PLC)

1. Penetration – setting a low initial price on a new product to appeal immediately to the mass market (also initial stage of PLC).

2. Prestige – setting a high price so that status-conscious consumers will be attracted to the product and buy it.

3. Price lining – a company may price a product at different pricing points (ex: a car – basic model, additional features)

4. Odd-even – setting prices a few dollars or cents under an even number (6.99$)

5. Target – manufacturer deliberately adjusts the composition and features of a product to achieve the target price to consumers.

6. Bundle – the marketing of two or more products in a single “package” price.

7. Yield management – example of it is varying prices by time, day, seasons, etc.

1. Cost-based pricing

1. Standard markup – adding a fixed percentage to the cost of all items in a specific product class. This percentage varies depending on retail store (grocery, furniture, etc) and on the product involved. High-volume products usually have smaller markups than do low-volume products.

1. Cost-plus – summing the total unit cost of providing a product and adding a specific amount to the cost to arrive at a price (cost-plus percentage-of-cost or cost-plus fixed-fee pricing). Основана на оценке затрат.

2. Experience curve – depends on stage of PLC. The method is based on the learning effect, which holds that the unit cost of many products declines by 10-30% each time a firm’s experience at producing and selling them doubles.

2. Competition-based pricing

1. Customary – traditional prices (ex: Swatch watches)

1. Above, at, or below market – benchmarking with competitors’ products.

2. Loss, leader – for a special promotion many retail stores sell a product below its customary price to attract attention to it.

32. Profit and value equations and their role in marketing pricing policy

“Prices should reflect the value that consumers are willing to pay” versus “prices should primarily just reflect the cost involved in making a product or service.”

F rom the consumer’s standpoint, price is often used to indicate value when it is paired with the perceived benefits of a product or a service.

Pricing is also a critical decision made by a marketing executive because price has a direct effect on a firm’s profits. This is apparent from a firm’s profit equation:

Profit = Total revenue – total cost or Profit = (Unit price x quantity sold) – Total cost

33. Market segmentation. Criteria of target segment selection. Market positioning.

Segmentation is a process of division of the market into consumer groups with similar needs. Market segmentation is performed based on a number of criteria, e.g. geographical, social, demographical, psychographical or behavioral.

Resulting segments require further evaluation of their attractiveness. This evaluation serves as a basis for development of a marketing strategy targeted on product positioninhg as well as development of marketing strategy targeted on chosen segments. Evaluation of segments is based on certain critera:

1. Segment size and growth

2. Structural attractiveness of the segment

3. Aims and resources of a company evaluating the segment.

Positioning defines the features of perception of the product by segments. In the process of positioning it is important to pay attention to characteristics of the produc or service which are the most signifiant to the customer.