Pricing During Difficult Economic Times During a recession, companies must consider their unique situation and what value they provide customers when devising a pricing strategy. LEARNING OBJECTIVES Discuss pricing strategies during difficult economic times KEY TAKEAWAYS Key Points Many companies are tempted to slash prices during a recession, but this strategy should be carefully considered. Cutting prices can degrade the value of the brand, lead to a price war, and… Read More »Pricing During Difficult Economic Times

Product Line Pricing Line pricing is the use of a limited number of price points for all the product offerings of a vendor. LEARNING OBJECTIVES Describe the characteristics of line pricing KEY TAKEAWAYS Key Points Line pricing is beneficial to customers because they want and expect a wide assortment of goods, particularly shopping goods. Many small price differences for a given item can be confusing. From the seller’s point of… Read More »Product Line Pricing

Specific Pricing Strategies New Product Pricing With a new product, competition does not exist or is minimal, hence the general pricing strategies depend on different factors. LEARNING OBJECTIVES Compare and contrast penetration pricing and skimming pricing KEY TAKEAWAYS Key Points Penetration pricing is the pricing technique of setting a relatively low initial entry price, often lower than the eventual market price, to attract new customers. The strategy works on the… Read More »Specific Pricing Strategies

Profit-Maximization Pricing Profit maximization analysis is the process by which a firm determines the price and output level that returns the greatest profit. LEARNING OBJECTIVES Describe profit maximization pricing relative to general pricing strategies KEY TAKEAWAYS Key Points Fixed costs, which occur only in the short run, are incurred by the business at any level of output, including zero output. Variable costs change with the level of output, increasing as… Read More »Profit-Maximization Pricing

Markup Pricing Markup pricing is a strategy in which a company first calculates the cost of the product, then adds a proportion of it as markup. LEARNING OBJECTIVES Examine the rationale behind the use of markup pricing as a general pricing strategy KEY TAKEAWAYS Key Points Markup pricing is used primarily because it is easy to calculate and requires little information. The first step to determine markup price involves calculation… Read More »Markup Pricing

Competitor-Based Pricing Organizations that sell products or services may look at what price a product is generally being sold at and set that as a target for the sales price. LEARNING OBJECTIVES Understand why matching the price of competitors is important, and how it can be misused (i.e. price fixing) KEY TAKEAWAYS Key Points Determining the price of a product or service can be approached many different ways, from consumer… Read More »Competitor-Based Pricing

Demand-Based Pricing Demand-based pricing is any pricing method that uses consumer demand – based on perceived value – as the central element. LEARNING OBJECTIVES Demonstrate the meaning of and the different types of demand-based pricing KEY TAKEAWAYS Key Points Price skimming is a pricing strategy in which a marketer sets a relatively high price for a product or service at first, then lowers the price over time. Price discrimination exists… Read More »Demand-Based Pricing

General Pricing Strategies Cost-Based Pricing Just as it sounds, cost-based pricing identifies the overall fixed, variable, and indirect costs of production and prices that product accordingly. LEARNING OBJECTIVES Grasp the concept of pricing based on overall costs, and identify the various cost inputs involved KEY TAKEAWAYS Key Points When all operational fixed and variable costs are measured, and indirect costs are also compensated for, a price point can be determined… Read More »General Pricing Strategies

Product Quality Quality refers to the ability of a product or service to consistently meet or exceed customer requirements or expectations. LEARNING OBJECTIVES Identify the different aspects and determinants of product quality KEY TAKEAWAYS Key Points Some of these consequences of poor quality include loss of business, liability, decreased productivity, and increased costs. Good quality has its own costs, including prevention, appraisal, and failure. Successful management of quality requires that… Read More »Product Quality

Return on Investment Marketers should understand the position of their company and the returns expected when making adjustments in prices. LEARNING OBJECTIVES Explain why pricing objectives focus on delivering a return on investment (ROI) KEY TAKEAWAYS Key Points Return on investment is one way of considering profits in relation to capital invested. Marketing not only influences net profits but also can affect investment levels, too. New plants and equipment, inventories,… Read More »Why Pricing Objectives Focus on delivering Return on Investment