- Price
- Self-explanatory – price of the product
- Must consider a product’s costs, how much customers are willing to pay, profit targets, competition, etc.
- Pricing strategies
- Cost-plus pricing
- Adding a percentage or predetermined amount (markup) to average cost per unit to set the selling price
- Ensures a product will produce contribution
- Competition-based pricing
- Price leadership
- Set by the market leader and other firms simply follow
- Predatory pricing
- Temporary reduction in price to drive away competition
- Can be as aggressive as to sell below cost/at a loss
- Going-rate pricing
- Simply pricing at about the average price level of most products in the market
- Market-led pricing
- Penetration pricing
- Newcomers set their prices low to entice people to buy
- Price changes from low to high
- Risk: lower prices = lower reputation
- Price/market skimming
- Get a feel for what the market is like, set the price high, then as you understand the market better your prices will slowly decrease
- Prices changes from high to low
- Price discrimination
- The price of a product varies per country, which depends on the market; however, the products should not be easily traded
- Results to the government applying taxes/tariffs
- Loss leadership
- Products are sold at a loss, but regain their losses through their other products
- e.g. PS3 sold at a loss, but profits are gained through games
- Psychological pricing
- Some numbers are more appealing
- Promotional pricing
- Offer discounts, rebates, promotions, etc.
- Assure that your market likes discounts, otherwise there will be no reason in offering the promotions
Kim De Leon4.5b. The Four Ps – Price
