Penetration Pricing LEARNING OBJECTIVES Explain why a company would use penetration pricing What Is Penetration Pricing? Penetration pricing is a pricing strategy in which the price of a product is initially set low to rapidly reach a wide fraction of the market and initiate word of mouth.[1] The strategy works on the assumption that customers will switch to the new product because of the lower price. Penetration pricing is most commonly associated with marketing objectives of… Read More »Penetration Pricing

Introduction to Common Pricing Strategies What you’ll learn to do: compare common pricing strategies Thus far we have discussed many pricing considerations: the impact of pricing on value perceptions, the effects of elasticity, and approaches to common pricing objectives. In this section we are going to introduce some very specific, yet standard pricing strategies that organizations use to bring these concepts together. They do not replace the information that we have discussed to this… Read More »Introduction to Common Pricing Strategies

Benefits of Value-Based Pricing LEARNING OBJECTIVES Describe the benefit of value-based pricing for customers The Customer and the Pricing Decision We have discussed common company objectives that affect pricing and the competitive impact on pricing. The most important perspective in the pricing process is the customer’s. Value-based pricing brings the voice of the customer into the pricing process. It bases prices primarily on the value to the customer rather than on the cost of the… Read More »Benefits of Value-Based Pricing

Competitor Impact on Pricing LEARNING OBJECTIVES Describe how competition affects pricing strategies Introduction It’s important to remember that pricing is just one component of the marketing mix, and even very specific pricing decisions need to take into account the other components. This is particularly true in a competitive marketplace. Actions by different competitors integrate all elements of the marketing mix and do not focus on price alone. A competitor might make a change to a product or… Read More »Competitor Impact on Pricing

Break-Even Pricing LEARNING OBJECTIVES Define break-even pricing Introduction Regardless of the pricing strategy a company ultimately selects, it is important to do a break-even analysis beforehand. Marketers need to understand break-even analysis because it helps them choose the best pricing strategy and make smart decisions about the short- and long-term profitability of the product. The break-even price is the price that will produce enough revenue to cover all costs at… Read More »Break-Even Pricing

Introduction to Pricing Considerations What you’ll learn to do: explain the primary factors to consider in pricing Now that we’ve considered the customer perspective, we need to understand how pricing fits into the company strategy. It’s important to remember that all elements of the marketing mix, including pricing, fit into a larger customer mission and strategy. An effective pricing strategy will align with the corporate mission, account for competitive factors, and… Read More »Introduction to Pricing Considerations

The Psychology of Pricing LEARNING OBJECTIVES Discuss psychological factors in pricing Introduction You will notice that when we discussed the value equation in the previous reading, we referred to perceived benefits and perceivedcosts, rather than absolute/actual benefits and costs. Every customer perceives benefits and costs differently, and many of these perceptions aren’t even conscious. There are very few buying decisions in which a customer meticulously lists and weighs the benefits and costs in order to determine value. More… Read More »The Psychology of Pricing

Demonstrating Customer Value LEARNING OBJECTIVES Describe the customer view of value and pricing Introduction Rent the Runway is a company that lets customers borrow expensive designer dresses for a short time at a low price—to wear on a special occasion, e.g.— and then send them back. A customer can rent a Theia gown that retails for $995 for four days for the price of $150. Or, she can rent a gown from Laundry by… Read More »Demonstrating Customer Value

Introduction to the Impact of Pricing on Value What you’ll learn to do: discuss how price affects the value of an organization’s products or services Price determines how much revenue a company is going to earn. It determines whether the business is covering the costs to create and deliver its products. Price drives the financial health of the business. In out initial discussion of pricing, we’ll start with the perspective of the customer.… Read More »Introduction to the Impact of Pricing on Value

Why It Matters: Pricing Strategies Why learn about pricing strategies? When Amazon.com was created in 1994, the company sold books online. While many viewed it as a real threat to traditional bookstores, few, other than its founder and CEO, Jeff Bezos, imagined what the company would become. Today the services that Amazon offers are extensive, and many of them center on a quiet service membership called Amazon Prime. The following… Read More »Why It Matters: Pricing Strategies