Marketing_L7
.pdfHow to measure the value customers will a@ach to its product?
An old Russian proverb:
there are two fools in every market— one who asks too much and one who asks too liRle.
• Good-value pricing
O ering the right combina&on of quality and good service at a fair price.
Ryanair appears to have found a radical new pricing soluIon, one that customers are sure to love: Make flying free!
• Everyday low pricing (EDLP) involves charging a constant, everyday low price with few or no temporary price discounts.
Retailers such as Costco and the furniture seller Room & Board pracIce EDLP.
The king of EDLP is Walmart, which pracIcally defined the concept. Except for a few sale items every month, Walmart promises everyday low prices on everything it sells.
• High-low pricing involves charging higher prices on an everyday basis but running frequent promo&ons to lower prices temporarily on selected items.
Department stores such as Kohl’s and Macy’s pracIce high-low pricing by
having frequent sales days, early-bird savings, and bonus earnings for store credit-card holders.
• Value-added pricing
AMaching value-added features and services to di eren&ate a company’s o ers and charging higher prices.
Rather than dropping prices for its venerable Stag umbrella brand to match cheaper imports, Currims successfully launched umbrellas with funky designs, cool colors, and value-added features and sold them at even higher prices.
Cost-Based Pricing
SeTng prices based on the costs for producing, distribu&ng, and selling the product plus a fair rate of return for e ort and risk.
Types of Costs
Costs at Di erent Levels of Produc&on
Costs as a Func&on of Produc&on
Experience
• Experience curve (learning curve)
The drop in the average per-unit produc&on cost that comes with accumulated produc&on experience.
Cost-Plus Pricing
• Cost-plus pricing (markup pricing)
Adding a standard markup to the cost of the product.
Break-Even Analysis and Target Profit
Pricing
• Break-even pricing (target return pricing)
SeTng price to break even on the costs of making and marke&ng a product or seTng price to make a target return.