Promotion Essay

711 Words Dec 6th, 2014 3 Pages
Chapter 14

Managing Pricing Decisions

Price is a core component of value. Value: ratio of the bundle of benefits a customer receives from an offering compared to the costs incurred by the customer in acquiring that bundle of benefits. Price or more specifically the customer’s perception the offering’s pricing – is a key determinant of perceived value. Elements of managing pricing decisions 1. Establish pricing objectives and related strategies 2. Select pricing tactics 3. Set the exact price 4. Determine Channel discounts and allowances 5. Execute price changes 6. Understand Legal considerations in pricing Establish pricing objectives and related strategies * Pricing objectives are the
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* Captive pricing: gaining a commitment from a customer to a basic product/system that requires continual purchase of related to operate * Price bundling: reduction due to the purchase of a package including different prices which are reduced (cable television). * Reference pricing: have comparative price for customers when they purchase a products. * Prestige pricing: relatively higher price compared to competitors. * Odd/even pricing: odd pricing: the price is not expressed in whole dollars. Even pricing: whole dollar amount ($1.99 versus $2.00). Odd pricing was first develop to reduce theft from the clerk. Now it is used as psychological pricing. * One-price and variable pricing * Everyday Low Pricing (EDLP) and high/low pricing: concept of reducing investment in promotion and transfer part of the savings to lower price. * Auction pricing: as eBay SET THE EXACT PRICE It exists 4 methods to set an exact price for an offering: * Cost-plus pricing/markup on cost: adding a standardized markup on top of costs for an offering. * Markup on sales price * Average-cost pricing: based on: all costs / total number of units= average cost of a single unit * Target return pricing DETERMINE CHANNEL DISCOUNTS AND ALLOWANCES Discounts are direct, immediate reductions in price provided to purchasers. Allowances remit monies to purchasers after the fact. * Cash discounts: to elicit quicker payment of

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