Week 4: Product Positioning and Strategy Discussion
Pricing Strategies (graded)
As part of the Marketing Mix, PRICE, P, is important to the marketer. Yet when we look at price, it is more than
just a dollar figure. What does price represent to the consumer? What does price represent to the marketer?
Responses
Response
Pricing
Strategies
Author
Professor Forbes
Date/Time
9/23/2012 6:39:14 AM
As they say in the text...
Price is not just a number- it is all around us! This is a good topic to see how pricing is
positioned. Let's start with also quickly discussing how companies price and some of
the consumer psychology of pricing...In addition to our lead topic, Lets' review setting
the price and the major pricing objectives- What are these? What is the goal of picking
one? What happens in each?
RE:
Pricing
Timothy Rinard
Strategies
9/30/2012 11:40:17 PM
I have found that when I watch commercials, I am exposed to many things
such as pricing, and other strategies that are constantly improving; as the
research behind human psychology is constantly growing. Over the
years, commercials have become laser targeted to specific groups, and use
strategies for everything, and it can be as simple as the colors that are used. I
find this to be very alarming, as I do not regularly watch television, and have
seen a huge difference in as little as four years, in the different things that are
being done in new commercials that target consumers
RE:
Pricing
Yonny Leon
Strategies
9/26/2012 4:07:41 PM
In terms of the marketing mix some would say that price is the least attractive
element. Marketing companies should really focus on generating as high a
margin as possible. The argument is that the marketer should change product,
place or promotion in some way before resorting to price reductions.
However price is a versatile element of the mix as we will see.
RE:
Pricing
Rose Neal
Strategies
9/25/2012 7:16:26 PM
Price is more than a number...it is what the customer perceives as a good deal
or what they are willing to pay. It is also what the company wants to make as
a profit. It requires homework on the part of the consumer and the
marketer. For the consumer; they will compare other brands of the same
product and then they will compare items that are comparable but not
necessarily the same. In doing so they will decide whether either option
meets their budgeted amount. For the marketer; they will look at their
competition to see what they are pricing and then they will look at
the economic factors to determine if the target audience can and will pay the
price they have in mind. They will also look at what their profit margin is
and how far they can adjust in either direction to make a profit and still be
competitive.
RE:
Pricing
Julio Rhymer
Strategies
9/24/2012 8:43:29 PM
Companies price based on where they want to be position in the market. For
example to gain entry into a establish market many new entries price low or
at a discount to obtain a base of customers.
RE:
Pricing
Latonya Hughes
Strategies
9/24/2012 9:12:42 PM
I think when you think of pricing you thinking of all the factors such
as: What the company actually paid for the product overall and what its
competitors are selling it for. The objective is to make a profit and as much as
you can even if you have to mark up your price due to the quality of the
product or service. There are certain stores that mark up their prices because
of their status in the market such as: Von Maur, Saks, Neiman Marcus, etc.
over its competitors; Macy's and Carson Prairie Scott. They often have the
same items, but priced differently. Consumers expect to and will pay more
for the service, status, and atmosphere. However, a company want to avoid
price gauging to not commit an illegal act like some do with gas. Price
representing to the consumer is important according to the consumer's
satisfaction being that they are the one(s) that will benefit from the product or
service. They are the ones that has to use the product or service and
determine its value. For the marketer, their main interest is to make a profit
while distinguishing their brand and loyalty from the consumer.
RE:
Pricing
Jason Ho
Strategies
9/24/2012 10:12:26 PM
Under Porter’s Generic Strategies he has introduced 5 different types of strategies in order to
achieve competitive advantages. Out of them the latest strategy which is (Best Cost
Provider Strategy) telling that the organization can gain competitive advantages
(advantages over and above our competitors ) by offering a product with higher attributes/
facilities/ additional features (NOT a Basic product) at a lower price compared to its
competitors.
Higher Attributes + Low Price = Best Cost Provider Strategy
For examples would be Toyota Lexus. Toyota had been doing various researches and
experiments on producing a Luxury vehicle which can outperform Benz, BMW, Cadillac and
Volvo. (A vehicle with higher attributes/ features than Benz, BMW) So the ultimate result
was the introduction of Lexus. But the main important thing was that they could sell this
Luxury Vehicle at a lower price compared to its main competitors Benz and BMW. This is
mainly due to their Lean Management (Keeping wastage at the minimum level and increase
the efficiency)Toyota has been recognized as the best company for practicing Lean
Management at the best possible level.
According to Toyota: Performance of Lexus = Performance of BMW 5 series car but the
price of Lexus = BMW 3 series car price.
RE:
Pricing
Professor Forbes
Strategies
9/26/2012 8:16:16 AM
Jason, Julio, Latonya & All....Great points....These psychological
cues on pricing are big business- discounts, big sales, clearances,
every day low prices, ending prices in $.99....Which do you feel is
the most effective and why? Got some research to back it up? What
can we find to show that this works? My favorite is how they quote
prices in so much per day or month....Why does this work? What can
you find?
RE:
Pricing
Drew Gallagher
Strategies
9/26/2012 2:16:08 PM
The pricing trick that I like best is one that I see on tv ads or
info-mercials. When ever you see a product offered they
never give the full price, they alway say something like 3
easy payments of 9.99. I don't know why but it somehow
tricks my brain into thinking the price is lower than it is. I
guess it's because all I see is the one monthly payment and I
don't immediately do the math usually because I just don't
care enough to consider buying something I see on an infomercial. It's surprising how well some of those products do
and I wouldn't be surprised if this style of price listing in one
of the main reasons why.
RE:
Pricing
Jennifer Magana
Strategies
9/29/2012 11:28:04 PM
I think that the marketing strategy of quoting prices in so
much per day or month works because it tricks the consumer
into thinking that they are not spending as much as they
really are on the product or service. I like how stores will
send you a discount coupon in the mail for 20% off of one
item. This coupon is not worth much unless you purchase an
expensive item. It will make you look at that store for the
big expensive items before looking anywhere else. The
marketers know that you are likely to buy more than one
item that you use the coupon for, so its a simple way of
getting you in the store ready to spend money.
The article at the link below is a field study conducted to
show the effectiveness of using psychological cues on
pricing. The study found that using the cues had the same
affect of the customer as dropping the interest rate for a loan
by a few points.
http://www.econ.yale.edu/seminars/develop/tdw05/bertrand050418.pdf
RE:
Pricing
Kristin Muchowski
Strategies
9/23/2012 1:05:41 PM
Price is the value the company puts on their product, the consumer will either
see the value and pay or look for another alternative. I think it is amazing
how some consumers respond, if it is expensive it must be better than the less
expensive brand. Expensive often signifies to the customer that it is either
high quality, rare, or should hold some sort of extra value. I feel like people
that dont have great knowledge with specific product and want something
quality often associate price with the item.
What does
price
represent to Anish Varghese
the
marketer?
9/23/2012 3:30:05 PM
To the marketers, a price is not just how much the product costs to
make and distribute. They should also know how much is charged by the
product's direct competitors and what should be the price compared to
other similar products. The key here for the marketers is to find how
much is the consumer willing to pay.
RE: What
does price
represent Ira Hughes
to the
marketer?
9/24/2012 1:54:04 PM
Price to the marketers represent the worth of what they feel their product will
garner from customers as well potential customers. Although the dollar
amount is the ultimate caveat a lot of work goes into ultimate price which
goes on the product. Part of the makeup of price is what does the marketer
think the economic worth maybe of the item that is being produced. For
instance is the target market blue collar or white collar.
Pricing
Strategies
Professor Forbes
9/25/2012 5:53:50 AM
Nice Thoughts AllOn the key pricing objectives- Have the list down? What do we have here on pricing objectives on page
383? What are they? What do they do? When does it make the most sense to use each? Pick one and
go….
While we are at it… What is the three “C”’s model for price setting? What sets the ceiling and floor
prices here?
RE:
Pricing
Jason Ho
Strategies
9/25/2012 10:09:23 PM
The three “C”’s model for price setting:

Cost Pricing : How much does my service cost me to furnish? Once you've
established your start-up costs and your monthly operating costs, you'll
have a good idea of how much your service will cost you to furnish to your
clients.

Competitive Pricing:How much are your competitors charging? A few
telephone calls should get you this information. Of course, you must make
sure you're comparing apples with apples. Your competitor may not have
your level of skill in this area, or she may have more. Your competitor
may also include costs for some specialized resources that you don't have.

Client Pricing: How much do the clients expect to pay? Remember that the
question isn't how much will clients pay, it's how much do they expect to
pay? The difference is expectations. You may get some clients for your
service to pay an excessive fee for a while, but they'll soon move to other
sources.
RE:
Pricing
Connie Brooks
Strategies
9/26/2012 6:17:07 AM
Modified:9/26/2012 6:27 AM
5 Key Pricing Objectives:
1 - Survival: short term objective
2 - Maximum current profit: this objective assumes that the firm has
knowledge of its demand and cost functions.
3 - Maximum market share: the belief is higher sales will lead to lower
unit costs and higher long-run profit.
4 - Maximum market skimming: Prices are set high to maximize the
amount of revenue
5 - Product quality leadership: brands strive to be affordable luxuries.
The three "C" model for price setting is 1 Costs - 2 Competitors' prices and
prices of substitutes - 3 Customers' assessment of unique product features
RE:
Pricing
Drew Gallagher
Strategies
9/28/2012 2:31:54 PM
Survival is one of the pricing objectives. Survival is a short-run
objective. A company may pursue this objective if they are plagued
with overcapacity, intense competition, or changing consumer
wants. This can also be used as a strategy when a company first
enters the market place. If they need to quickly gain customers in
order to survive they may offer bargain basement prices in order to
gain a customer base. When a new cable company moved into the
area they offered extremely low prices for the first year and then
after the year raised their rates after gaining a constomer base.
RE:
Pricing
Michael Soo
Strategies
9/25/2012 9:33:20 AM
The three C's model for price setting includes Cost, Competition, and
Customers.
Costs include any costs associated with the business. This is not limited to
just marketing costs, but includes overhead costs, production costs, materials
costs, insurance costs and any salaries and wages.
Competition relates to the position of the business within the industry and
how the price should be set in relation. If a company makes an inferior
product, then they should not charge as much as a company that puts detail
and effort into their work to create a far superior product. As an example, a
BMW is a far nicer car than a Hyundai, and is constructed with far more
detail, but a BMW costs significantly more than a Hyundai.
Customers are the third arm of the three C's price setting model. Knowing
one's customers means that the business understands cost-wise, the maximum
amount a customer will pay for the product or service. If the price is too high,
customers might be lost to competition. If the price is too low, the workers
will be overworked and the margins on the product will be too small.
RE:
Pricing
Professor Forbes
Strategies
9/27/2012 9:08:02 AM
Michael, Connie, Jason & All...
Great path - All: What does price mean to you? Does
price always signal quality? What else does it mean to
you? How is it quantified? Got some research to back up
your position? Remember to keep it substantive....
RE:
Rose Neal
9/29/2012 12:05:13 PM
Pricing
Strategies
I tend to agree with my classmates; price does not always
mean quality. I seem to remember an article that talked
about how much it actually costs to make the Nike tennis
shoes versus how much they actually sell for. I was amazed
but not surprised. Depending on where your product is
made the cost to make it could be very low and thus the
amount that you sell it for is your profit margin. That shows
the greed in many companies.
I learned years ago that many times the "store brand" of
many brand name items are produced in the same facility
and the only difference is the packaging. Is the difference
in cost really that important? I am not saying that all "off
brands" are that way but many are. Take generic versus
brand medications; they each contain the same active
ingredients but they receive different packaging and the
brand is marketed whereas the generic is not but essentially
they are the same until you go to pay for them.
RE:
Pricing
Michael Soo
Strategies
9/27/2012 11:46:28
AM
I don't believe that price necessarily signals quality. There
are many times when price simply signifies an exaggerated
markup. Personally, I would much rather look for a good
compromise between quality and price. Sure, I will pay a
little more for a product that I know to be of good quality,
but I won't pay significantly less for a far inferior product.
An example of this would be buying cheap razor blades
versus expensive razor blades. Sure, I might be able to get a
pack of 100 blades for $10, but at what quality? Are they
going to nick up my face and cause problems? And will the
product life equate to that of a more expensive blade which
might cost $10 for 5 blades.
RE:
Pricing
Julie Hicks
Strategies
9/27/2012 11:21:08
PM
That is so true, Michael. Many people in society these days
seem to think that a higher price does signify quality. That
isn't always the case especially when it comes to the new
technology such as tablets. The I-pad was the best thing ever
or so everyone thought. The premium pricing strategy
seems to be the strategy that many marketers use just to
keep the consumers interested in their particular
product. Apple seems to lead the way for this technique.
Now, the Samsung Nexus is the latest and greatest thing on
the block. Nexus is $200, "Nexus 7 is quick, slick, and
pocketable." There is information that the New I-Pad mini
will blow this out of the running because its offering more
of everything apps, music, TVs, more units available
to stores, etc.. The article didn't mention pricing but I am
sure it will be outrageous as usual. The I pad to me is not
better just more costly and doesn't give the user enough like
space or options for the large $800-$1000 price.
http://www.forbes.com/sites/briancaulfield/2012/07/23/whyan-ipad-mini-will-crush-googles-nexus-7/
http://www.marketingteacher.com/lesson-store/lessonpricing.html
RE:
Pricing
Professor Forbes
Strategies
9/30/2012 6:32:04
AM
Thanks Guys- Great research- A lot goes
into these price positioning techniquesKeller offers a class on Consumer Behavior
that covers of many of them and moreinteresting stuff!
RE:
Pricing
Drew Gallagher
Strategies
9/30/2012 6:50:42 PM
Price does not always signal quality to me. Often price can
signal status as is often the case in the clothing
industry. One example that comes to mind is with
basketball shoes. When I wasn't buying the shoes myself in
Junior High and Highschool I was obsessed with having
Jordan's which were always much more expensive than
anything else on the market. Now that I have to buy them
myself, I just go to Kohls and buy a pair for $30 and to be
honest I can't tell a difference. Now the new Lebron James
shoes are something like $250 and I'm sorry but that price
just doesn't translate into extra quality.
RE:
Pricing
Daveed Yisrael
Strategies
9/27/2012 8:26:16 PM
The major pricing objectives are survival, maximum current profit, maximum market share,
maximum market skimming, and product-quality leadership. Companies pursue survival
objective when they are plague with overcapacity and intense competition. Maximize current
profits strategy are used when companies assumes that firms has the knowledge of its
demand and cost functions. Maximum market objectives are to set the lowest prices assuming
that market is price sensitive. Maximum market skimming is where prices start off high and
slowly drop down. The main objectives for product quality leadership are to offer brands that
are affordable luxuries. The three C’s are Cost, Competitor prices and customers’
assessment. High prices sets the ceiling prices and low prices set the floor prices.
RE:
Pricing
Professor Forbes
Strategies
9/29/2012 9:18:49 AM
Deiny, Daveed, Julie, & All...
Great work on these pricing objectives- We should all know these
and when they might be appropriate...Say for the example I use today
on the "super oil" ...which might we use here?
Pricing
Deiny Moretta
9/25/2012 9:57:12 AM
Pricing is one of the most important elements of the marketing mix, as it is the only mix, which
generates a turnover for the organisation. The remaining 3p’s are the variable cost for the organisation.
It costs to produce and design a product, it costs to distribute a product and costs to promote it. Price
must support these elements of the mix. Pricing is difficult and must reflect supply and demand
relationship. Pricing a product too high or too low could mean a loss of sales for the organisation
RE:
Pricing Christine Moore
9/26/2012 11:54:21 PM
Yes! Pricing is difficult to set and I would agree that the cost of something
directly reflects the demand and quality of a product. We are all influenced
by price, and selecting the price objective establishes where you want to lie
within the market. As a consumer price reflects quality (at least that is
initially what comes to mind) for a marketer price would represent numerous
things and depends on the cost of all involved and demand of the product.
Pricing
Strategies
Andreana Collins
9/25/2012 4:57:32 PM
Price represents more than just a dollar amount to a consumer. One big aspect of price to the consumer
is its reflection of a product’s quality. For many buyers, a higher price tag symbolizes higher
quality. The opposite is true for less expensive items; a lower price tag can make an item appear
cheap. Although this is true, marketers still have to be careful about setting a price too high. An overly
expensive product can just as easily be dismissed as a waste of money, especially when consumers have
other references prices for a similar item. Price also has various representations for the
marketer. When initially setting a price, marketers have to decide what pricing objective they will
use. Survival, maximum, current profit, maximum market share, maximum market skimming and
product-quality leadership are the five major pricing objectives. Each one of these objectives has a
different impact on consumer behavior. For example, the maximum market skimming objective would
be most useful for companies introducing new technologies (which consumers would be willing to pay
more for). Marketers also have to focus on demand for their product when setting a price. They have
to be aware of any competitors in the market and understand the effects of price elasticity.
Pricing
Strategies
Professor Forbes
9/26/2012 8:15:12 AM
So...
After we review the 3C's on figure 14-5, let's look at costs......What are costs comprised of?
How are they measured?
Thanks for the start !
How do we Identify these costs- What is Unit contribution? What is Break Even?
RE:
Pricing
Daveed Yisrael
Strategies
9/28/2012 5:35:16 PM
We can identify cost by either being fixed or variable cost. Cost seems to be measured in
quantity production per day. To measure cost some companies use activity based accounting
to estimate the profitability of to different type of customers. In order for some one to break
even companies want their cost per unit to equal to the level of production. Companies may
break even if they can create an increase in demand so that the total price of selling the
product is the same as the production cost to manufacture the items.
RE:
Pricing
Julie Hicks
Strategies
9/29/2012 7:02:59 PM
Daveed, this strategy has been used for a very long time. Costs
usually directly affect payroll, expenses, etc. The amount of
production is done in direct correlation of inventory and demand for
a certain item.
RE:
Pricing
Connie Brooks
Strategies
9/27/2012 6:18:25 AM
Unit contribution is the variable cost subtracted from the sales price. Break
Even is the fixed costs divided by the contribution margin ratio.
Contribution margin is the excess of sales revenues over variable costs.
Contribution margin is the amount of funds left from a sale after the variable
costs have been paid.
Unit Contribution is the dollars from each unit of sales available to cover
fixed costs and provide net income from operations.
Basic Breakeven Equation Method
Sales = Variable Expenses + Fixed Expenses + Profit
RE:
Pricing
Anish Varghese
Strategies
9/26/2012 4:47:07 PM
Unit contribution shows a company how profitable
each unit is. It is calculated by subtracting the
expenses from the revenue. The break-even point is
the number of units it needs to sell in order to
cover the company's fixed and variable expenses. It
is calculated by dividing the total amount of fixed
costs by the contribution margin.
RE:
Pricing
Jason Ho
Strategies
9/26/2012 10:08:07 PM
The product costs of direct materials, direct labor, and manufacturing overhead are also
counted as inventory costs, since these are the necessary costs of manufacturing the
products. Costs such as advertising, preparing invoices, delivery expense, office salaries,
office rent and utilities, and interest on loans are examples of expenses that are not
considered to be product costs. Rather, these costs are expensed immediately to the period
instead of being assigned to a product.
Since some of the manufacturing overhead costs are fixed in total (factory rent, factory
depreciation, factory managers’ salaries), the per unit cost of a product will depend upon the
number of units manufactured during a given year. In other words, the cost of a product is not
know with precision, even though accountants will compute the per unit cost to the nearest
penny.
RE:
Pricing
Kristin Muchowski
Strategies
9/26/2012 8:51:13 AM
Costs are comprised of labor, the raw materials, and fixed costs.
The unit contribution is excess of the unit selling price over the unit variable
cost, and break even is a point where any difference between plus or minus or
equivalent changes side.
Here is an interesting article I found, and how pricing and costs would differ
is products were all made in the US:
http://www.theatlantic.com/business/archive/2011/05/how-much-would-theipad-2-cost-if-it-were-made-in-the-us-about-1-140/238508/
RE:
Pricing
Indisha Mussington
Strategies
9/26/2012 6:41:18 PM
I was very intrigued by your article Kristin. I knew that producing
products outside of the US was cheaper but seeing the numbers as it
relates to the production of the iPad was very interesting. I
motivated me to take a deeper look into the costs of Made in
America products. I was surprised to find that "Made in America"
products has become a niche market. Who knew. The article below,
like your ipad article highlights the cost of "Made in America" and
what it shows it that the costs to produce something 100% Made in
America is outrageously expensive.
http://www.huffingtonpost.com/2012/09/17/made-in-america-theluxury-label-will-cost-you_n_1891127.html
RE:
Pricing
Professor Forbes
Strategies
9/30/2012 6:30:53 AM
Indisha, Connie, Julie & All... Great work! Understanding
these components are a key step to knowing if your pricing
will work and profits will follow....So just for yucks...If your
business is profitable and growing do you really have "fixed
costs" so to speak?
What is the value in understanding the concept of Unit
Contribution?
RE:
Pricing
Bweleka Kasonso
Strategies
9/26/2012 1:02:00 PM
The cost of a product/service includes direct cost such as material, labor, and overhead cost
that are related to production ; and indirect costs such overheads(that support the business),
advertizing, transportation and all other cost associated with getting the product from your
business to the customer( wholesale or retail). One of the costs that may not be taken into
account is the cost of the brand; I think that when a brand is very popular, a business can
leverage that make a product cost more even if the quality is the same as less popular brands
and genetics.
RE:
Pricing
Ryan Phillips
Strategies
9/26/2012 10:15:47 PM
This is very true depending on the brand companies can and will
choose to raise their prices. For instance Walgreens typically carries
high and low end medicines. One may find Clairton at Walgreens
for instance $10.99 but then you could look over and see the
Walgreen's brand is about 3 dollars cheaper. Everyone knows even
the pharmacist will tell you they are basically the same exact
medicine but because of the Clairton brand name, they are able to
charge more.
RE:
Pricing
Latonya Hughes
Strategies
9/27/2012 7:47:16 AM
Bweleka and Ryan - You are both right and bring up a good
point. Yes, brand does make a difference in pricing when
considering the cost of a product or service. Ryan, I have
seen this at Walmart and Walgreens both with medicine. I
also see this often at grocery stores. They sell their brand
food at a lower price as to where the most commons brands
are higher. Example: At Jewel, they have DelMonte green
beans at $.99 a can and the Jewel brand is set at $69 a
can. There really isn't much difference, but some people just
can't get over the brand name and the taste and aren't willing
to try the what's called "generic" brand. I use to be that way,
but eventually changed as I got older and learned to
budget. However, there are some things that I just have to
have the more popular name brand because I tried the other
and it didn't taste right. I do know with medicine that this
doesn't work for me all of the time. I tried the Walgreens
brand of Zyrtec and it did not help.
Price
Semyya Cunningham
9/26/2012 5:29:41 PM
To a customer, the price is simply how much something costs---how much of
their hard earned money will be spent. To a marketer, price represents the most
dynamic and flexible thing about a product. A marketer has the power to change
a price of something with the snap of their fingers.
RE:
Price Ira Hughes
9/27/2012 7:47:17 PM
Price means different things to different customers, to some price may
represent the beginning or the end in the negotiations process. Others may
see pricing as the difference between the have and the have nots. The
seasoned buyer may see price as where the marketer sees the value in their
product. This value set by the marketer may inform the seasoned buyer
where the true pricing may very well be.
RE:
Price Semyya Cunningham
9/28/2012 11:02:02 PM
Thank you Ira! I like your answer. I can see how a good
marketer can use customer feedback and study the competition
to find out what a "good" price also is for their product. No
matter the price, if there's an inelastic need for the consumer;
they will pay whatever price is set by the marketer like it or not.
price
Cary Mitchell
9/26/2012 7:08:51 PM
Price to the consumer represents quality of product and work. The most that price
represents is the value we save as consumers. Price to the market represents the total
cost of manufacturing a particular item and this sets the price.
Price
Daveed Yisrael
9/26/2012 9:10:07 PM
Consumers often refer to prices with an internal reference price that they remember from a
prior product or service. Consumers also use price as an indicator of quality. Marketers tend to
use price to encourage reference price. When prices decrease customers believe that quality is
low. Marketers interpret price in terms of their knowledge of how consumers perceive prices.
Marketers sometimes think prices can be compared to past purchase experience.
Pricing
Strategies
Professor Forbes
9/27/2012 9:06:13 AM
Thanks folksLets stay on the key pricing objectives- We have the list down- When does it make the most
sense to use each? Pick one and go...And...
How About...Pricing methods- What are our choices here? Which do you see as particularly
appealing and why?
And......... while at it.....Let's dig in on perceived value pricing- so do all these elements work
the same in all situations? What is the real key to making perceived value pricing work?
RE:
Pricing
Bweleka Kasonso
Strategies
9/27/2012 12:29:20 PM
The three pricing methods are Cost-based pricing, Competition-based pricing, and Customerbased pricing. I think cost-based pricing is more appealing as it is based on all the costs
related to producing the product. You want the price of a product to at least cover the cost of
making the product so any markup is profit. Customer-based pricing can get complicated
because customers want to pay as little as possible for products so their idea of what
something should cost may by lower then what it cost you to make the product. Competitionbased pricing may lead to under pricing the product thus failing to cover production costs or
overpricing with no regard to the customers ability to buy the product. Cost, competition and
customers should all be considered when determining the price of a product but cost should
be the most important consideration.
RE:
Pricing
Deiny Moretta
Strategies
9/27/2012 6:03:29 PM
The key to perceived value pricing is to deliver more value than the
competitor and to demonstrate this to prospective buyers. Perceived value is
made up of several elements, such as the buyer's image of the product
performance, the channel deliverables, the warranty quality, customer
support, and softer attributes such as the supplier's reputation, trustworthiness,
and esteem.
RE:
Pricing
Kristin Muchowski
Strategies
9/27/2012 10:43:23 AM
There are several different pricing methods, there are methods that are cost
oriented, demand oriented and competition oriented. I think each one of these
has to be considered when entering a new and competitive market. If you
have a new sought after item with little to no competition you will use
demand oriented pricing, if you are coming in to a saturated market you may
look at competition oriented pricing, if you are trying to get your name out
there and break in to the market you will more than likely use cost oriented
pricing etc. This pricing may change throughout the life of your product, but
ideally you would like to have demand oriented pricing, if people perceive
your product with great value, you will be able to charge more.
RE:
Pricing
Christine Moore
Strategies
9/27/2012 7:49:57 PM
Perceived value pricing is where you fix your price point based on what your customer is
willing to pay for your product/service. Your customers will determine this based on their
perception of the value that you provide and how you measure up against competitive
offerings. The key to making perceived value pricing work is to deliver more value than the
competitor and to demonstrate this to prospective buyers. Basically a company must first
understand the customers decision making process. Each is different; some will be price
buyers, some value buyers and some loyal buyers. Therefore, companies need different
strategies for these groups.
RE:
Pricing
Professor Forbes
Strategies
9/30/2012 6:29:16 AM
Bweleka, Kristin, Deiny, Et al...
Perceived value pricing....Well Done All!
The company can determine the value of its offering by several
methods that include managerial judgments, focus groups, surveys,
analysis of historical data, conjoint analysis, and other means.
You also encapsulated the many variables perceived value is made
up of many elements, all of which creates the buyer's image of the
product performance, the channel of distribution deliverables, the
warranty quality, customer support available, and softer attributes
such as the supplier's reputation, trustworthiness, and esteem...........
Each potential customer places different weights on those three
different elements. And nice cover off on the types of buyers and
what you do!
And not to forget, A key here is to deliver greater value than what
your competitor does and be able to demonstrate to perspective
buyers.
Any other thoughts?
RE:
Pricing
Jason Ho
Strategies
9/27/2012 10:43:34 PM
The key to developing successful pricing strategies is knowing how customers arrive at their
perceptions of value. The factors to take into account in setting product price are the costs of
producing it, the demand for the product, the profit the business wishes to make, and the
market competition.
RE:
Pricing
Rebecca Aub
Strategies
9/28/2012 3:41:51 PM
Pricing strategies may also take into account the cost of production for a
manufacturer, based upon ROI and a break even formula. Added value packages
such as warranty, repair or support are extremely important in these cases since
there are fixed costs which will not change whether or not the item is sold. It then
becomes imperative to convince the customer of the overall value of purchasing
the product.
RE:
Pricing
Julio Rhymer
Strategies
9/28/2012 8:56:38 PM
Pricing methods are based on many factors, such as the quality of goods the
quality and quantity of advertisement and the budget of the company to push
its product. This determines the price of the goods such as Louis Vutton has
high quality goods and a large advertisement budget therefore has a premium
price on their goods.
Pricing
Strategies
Professor Forbes
9/28/2012 8:22:48 AM
Thanks For The Start...
Be familiar with these and the choices on pricing methods as when to use them....
Let's continue to dig in deeper on perceived value pricing- what it is and what is the
appeal- so do all these elements work the same in all situations? What is the real key
to making perceived value pricing work?
Also.... Adapting that price....
What is going on here? What are some examples of this in action? Pick a section and
go!
RE:
Pricing
Anish Varghese
Strategies
9/29/2012 2:44:39 PM
Perceived value pricing is the appraisal of the product
according to how much consumers are willing to pay for it,
rather than upon its production and delivery costs. Using a
perceived value pricing method might be somewhat hit or miss,
but it can greatly assist in the effective marketing of a
product since it sets product pricing in line with its
perceived value by potential buyers.
RE:
Pricing
Jennifer Magana
Strategies
9/28/2012 11:49:33 PM
Perceived value pricing is the value of a product according to what consumers
are willing to pay for the product, not based on the cost of manufacturing and
producing the product. The real key to making perceived value pricing work
is to keep the quality of the product consistent. If the customers continue to
value the product at a certain price point, they will expect to pay the price and
feel they are getting a good deal. (Kotler p. 392)
Adapting the price is used when a company sells one product at many
different prices varying with consumer or business that is purchasing the
product.(Kotler p. 400) I experienced a differentiated pricing situation when I
was residing in Anchorage, Alaska. Price discrimination in the form of
location and time pricing was common in areas that had a high volume of
tourists. The local businesses would increase their pricing during seasons
when they were more people visiting and drop their prices during winter
months. The stores that were located in remote locations would increase their
prices on products simply because the next nearest store would be miles
away.
RE:
Pricing
Rebecca Aub
Strategies
9/30/2012 9:47:37 AM
I agree with Jennifer> here in Naples Florida, the city is largely seasonal for five
months each year. As such during this time frame business are open longer hours
and additional days. Pricing fluctuates based upon what the market will bear.
Houses are rented at a substantial difference during season, often at almost triple
the price per month to maximize revenue and allow for the fact that the residences
are vacant for the other seven months.
This practice is also geographic as the portions of Naples that are not tourist
dependent, do not change their strategies.
RE:
Pricing
Julio Rhymer
Strategies
9/28/2012 9:02:06 PM
The key to value pricing is to deliver more value to the customer than any
other competitor. This does not mean a lower price for goods or service but a
better quality of product for a price that the customer perceives is equal to the
value.
RE:
Pricing
Latonya Hughes
Strategies
9/28/2012 1:29:53 PM
According to the website below "Perceived value is made up of several
elements, such as the buyers image of the product performance, the channel
deliverables, the warranty quality, customer support, and softer attributes
such as the suppliers reputation, trustworthiness, and esteem." more at
http://www.citeman.com/2753-perceived-value-pricing.html#ixzz27nINHfqh
I am going to focus in on the customer support and warranty. It is important
to me that when I purchase a product in particular, an electronic product, the
amount of support and warranty that comes with that product. I want to make
sure that if there is a default with the product that I can return the product
without any hassle. This is basically with any product, but with electronics,
companies have strict rules with charging the customer an additional stocking
fee or the customer is responsible for shipping the item themselves to the
manufacturer if they do not buy the stores extra warranty. This can cause a
low perception rate for many companies and vendors. I have heard some
horrible stories about this type of poor customer support. Companies need to
back their warranty and support their customers to build the trust and good
reputation.
RE:
Pricing
Rebecca Aub
Strategies
9/28/2012 3:30:31 PM
An element used by a company to base price as referenced by Latonya is
Reputation. The reputation of a Brand or Seller, is part of the consideration process
when the product is purchased of the service is used. For example, if a company
has a history of products that give good perceived value for money, or is well
known in the market even if the products are average or slightly above average,
people may pay more for this product. Or, the company being aware of this fact,
will have built into their price, a percentage for their reputation, trustworthiness
and reliability.
The idea and the success of this is to provide an overall package that is inherently
more valuable than that of ones competition. Consequently, many factors are
considered, not merely the base price.
RE:
Pricing
Indisha Mussington
Strategies
9/28/2012 5:33:04 PM
Latonya and Rebecca you both had good points regarding
perceived value and reputation. In today's economy I would
add value pricing to your discussion. In addition, to trading
on a company's reputation and perceived value; companies
are also relying on value pricing. Value pricing is where
companies offer high quality products for lower prices. For
consumers this is a win win. They perceived that they are
getting a good value due to the value pricing while still
getting a brand name product.
RE:
Pricing
Professor Forbes
Strategies
9/30/2012 6:33:03
AM
So which of these pricing objectives are you going
to use in your plan and why? Remember the pricing
section will be looking for one of these
strategies...so if you feel comfortable....Give it up &
Back it up!
RE:
Pricing
Bweleka Kasonso
Strategies
9/28/2012 11:04:45 AM
Perceived value pricing is pricing based on feedback from customers belief in the products
ability to satisfy need. Some products have a very high perceived value and a business can
leverage that to charge more than what was even estimated by the business. But on the flip
side, you may end up under pricing a high quality product because feedback indicates that
perceived value is very low; to mitigate this, a business can invest more resources in
communicating to customers so that they can understand and appreciate the value of the
product.
RE:
Pricing
Ira Hughes
Strategies
9/28/2012 12:44:40 PM
The idea of consumers determining the value or pricing of products
is called Perceived Value Pricing. This strategy may not be used
very often but, it may very well be the quickest way to move
products. At face value one may consider letting the consumer
determine the value or price of a product may seem backwards
however, some items may very well be over valued by potential
consumers and they may be willing to over pay by a lot or a small
fraction. On the other hand the consumer may under value an item
and may not be willing to pay fair market value for the product.
RE:
Pricing
Cary Mitchell
Strategies
9/29/2012 9:41:19 AM
I agree with you customers only perceive prices that they are willing
to pay for but when you use resources that indicate they are willing
to pay more than suggested you could be cutting your on throat.
Because depending on the type of community you are trying to reach
will determine how much to charge. It is just like stores they are set
up by the demographics of the area and the price is determined by the
area and what they are willing to pay.
Price
Consumer/Marketer
Yonny Leon
9/28/2012 12:51:03 PM
I believe that the consumer is the final user of the product for him price denotes
product utility, satisfaction legal & status. Because marketer is in business price for
him is profits, customer satisfaction, goodwill & brand equity.
RE: Price
Consumer/Marketer Timothy Rinard
9/30/2012 11:43:25 PM
Yonny I could not agree more, I feel the same way, and have seen that many
companies do not see this, and do not improve their customer relations in any
way, which is actually very detrimental to their sales, and continued growth
which is not a good strategy for a business that wants to continue to thrive.
Customer satisfaction, and feedback can mean everything, and in some cases
can make or break the products or services that you are providing.
A hypothetical
Professor Forbes
scenario…
9/29/2012 9:17:32 AM
So……………..All.............
Let’s try a hypothetical scenario…..
Let’s assume you are a the marketing lead for an auto accessory company and you come up with a new
oil that is so good that instead of changing oil every 3000 miles, a person can safely only change the oil
every 6000 miles. You call your new oil- Super Lube.
Super Lube costs $4.00 a quart to manufacture and market. You need to determine a price that you
would charge the retail store, as well as a suggested price they should charge their customers.
Competing Oil sells to the retail store for $5.50 a quart and they sell them to customers for $7.50 a
quart.
What price would you recommend charging the retail store for your Oil? What would you suggest be
the "list price" per quart to the customer?
What factors influenced your decision to set the prices that you did to the retailer and to the customer?
RE: A
hypothetical Julio Rhymer
scenario…
9/29/2012 4:37:58 PM
The suggested wholesale price to retail stores will be $6.75 and the the list
price for this premium product will be $8.25. The factors that determine my
price is the quality of the product and the amount of miles the product will
last. This will results in a lower volume of sales but a higher sales in dollar
amount.
RE: A
hypothetical Semyya Cunningham
9/29/2012 10:44:19 PM
scenario…
I hear you Julio, but I would lower both the wholesale price and
the list price. I would rather sell a lot more of a product at a
lower price than fewer at a higher cost. My customers will
appreciate my product costing about the same as other lower
quality oils that don't last nearly as long and they will reward me
by always buying MY product. If I am cheaper, better AND give
the patient more value than the other guy, I have essentially
eliminated all reason for them to ever purchase the competing
product.
RE: A
hypothetical Latonya Hughes
scenario…
9/29/2012 9:24:26 PM
This is a tough one. I will sell my product to the retailers cheaper than my
competitors. I will sell it for $5.25 a quart to the retailers and have them sell
it for $7.25. The reason why I will go cheaper than my competitors is
because I will aim to move the product faster than my competitors with it
being at a cheaper price. However, i will have to do mass marketing to the
consumers to convince them that my product is the same quality but at a
cheaper price. I thing that I could sell more at a cheaper price than my
competitors at a higher price if I invest heavily in my marketing strategies. If
I can get stores like Walmart, Gas Stations, 7-Eleven and Walgreens to
market my product that will help it to move. I will also invest in Groupon to
get people excited about it as well as give out free samples to local oil change
companies. "Word of Mouth", cheaper price and same quality as my
competitors will help me move my product at a cheaper price.
RE: A
hypothetical Michael Soo
scenario…
9/29/2012 12:33:54 PM
If Competing Oil is only good for 3000 miles, then I would aim for a target
price approximately 20-30% greater than Competing Oil. This would ideally
entice customers enough to spend just a little bit more for a better product that
will last them longer.
Selling to the retail store, I would sell for $6.50/quart, and recommend $8.50
to $9.00/quart MSRP. This makes our longer lasting oil very profitable, but
also allows to compete directly with similar oils. Appropriate advertising
would be needed to ensure that the customer knows exactly how much they
are saving by purchasing oil that lasts longer.
RE: A
hypothetical Ira Hughes
scenario…
9/29/2012 9:28:52 PM
For a fleeting moment I considered under selling to the retail market
at $5.00 and to the customer at $6.50. This was a consideration
because the thought process was that more products could be moved
by under selling the market and therefore getting more
customers. However, upon careful consideration it was determined
that the auto customer would feel that he or she would be more than
willing to pay more for what they would consider a superior
product.
RE: A
hypothetical Professor Forbes
scenario…
9/30/2012 6:27:14
AM
Great Work- Thanks for diving in!....
Some thoughts...
The lowest you could charge is your cost or $4.00 (may not make
sense but you could do it)
If the offering is worth $7.50 to consumers, yours would be
idealistically worth $15.00 as it would only involve 1/2 as many oil
changes all things being equal.
Here's the rub- if your channel partner sells your better oil for the
same price as the current oil- they lose- as it would involve only
one oil change at 6000 miles instead two at 3000 miles and they
would only get $2.00- So we need to lift the price at the retail level
to compensate and get 2 x $2.00 or $4.00 at a minimum.
Sooooooooooooooo I might go at it this way- suppose we did
something less to the consumer than the 2X price of $15.00- say
$12.00. We subtract the $4.00 from this to keep our channel
partner happy and we are at $8.00- So we could hypothetically
offer it to our partner in range from $4.00- $8.00. I might go with
$7.00 and make more for us and give them the option to make
another dollar at the customer level or drop the price a notch.
Now all this said we have not factored in the value to the
consumer to not have to bother with as many oil changes -which
might mean we could charge more than $15..... and if this is an
elastic or inelastic offering and that could impact pricing but I am
getting tired!
Kind of interesting when you add a channel partner in the mix isn't
it? What else did we learn here?
PS: New and unique product offering with no real
competitors....Sounds like a Market Skimming Pricing strategy to
me...
RE: A
hypothetical Rose Neal
scenario…
9/30/2012 3:55:58 PM
Our hypothetical oil will last twice as long as the Competing Oil. This means
that the stores will sell only half as much as the Competing Oil since you can
go longer on the hypothetical brand. I would sell it to the retail store for
$11.00 a quart and then suggest they sell it to their customers for $15.00 a
quart. This could be an introductory price and then once the customer base is
formed and customer see that they can save money with the Hypothetical
brand then we can suggest an increase in the price.
Closer...
Professor Forbes
9/30/2012 6:26:40 AM
Price....
It is everywhere you are going to be- As this week points there are so many
aspects of how prices are determined from objectives to adaptation....Right
down to how we handle our channel partners. Price is a powerful positioning
tool- make sure to review these issues as you prepare for the Final but more
importantly as you prepare you next plan draft.
RE:
Closer... Ryan Phillips
9/30/2012 7:04:54 PM
Unfortunately price is a powerful tool unless you have money then price does
not matter as much. As a everyday consumer I often times finding myself
looking at price more and more to look for savings. Price certainly has an
impact on whether or not consumers would buy, be interested, and refer
products. Companies must continue to be conscious in regards to price if
they are looking to remain competitive in their respect markets.
RE:
Closer... Michael Soo
9/30/2012 10:02:51 PM
Ryan, I believe that price is a powerful tool regardless of how much
money one has. Those who are wealthy likely did not make their
money spending frivolously on purchases they might not have
needed. They took their money and made it stretch as far as possible.
The savings they were able to obtain went into directly into money
making investments. Even in these investments, price plays a part, as
those wise with investments will target stocks and bonds which show
gains as opposed to losses.
RE:
Closer... Julie Hicks
9/30/2012 10:05:50 PM
I agree Ryan. Price can be a powerful tool I can. I am a huge
comparison shopper. I love to get a good deal, doesn't everyone, lol.
RE:
Closer... Jennifer Magana
9/30/2012 10:12:48 PM
I disagree about price not being a powerful tool amongst the wealthy
consumers. I think that when you look at the wealthy consumers,
price can be a bragging right. For instance, someone that is trying to
show off their success and wealth might look at a price and pick a
more expensive item simply to brag about paying for such a
luxurious product. It sounds shallow, but I have seen it first hand
with some family members. They want everyone to know that they
are successful and wealthy so they go buy the most expensive cars
and clothes to show the world their wealth.
RE:
Closer... Indisha Mussington
9/30/2012 10:43:21 PM
Clark Howard, a bestselling author and contributor on CNN
has make a name for himself by debunking myths about
price. Price doesn't necessarily guarantee quality, nor does a
lower price signify that you got a good deal. Well off
consumers like those who are not well off are always
looking for a deal. So even if you get a good price on a
product a normal person would tell you how much they
saved whereas a well off person may just name drop and let
you assume they paid full price.
http://www.clarkhoward.com/
Marketing
Price
Yonny Leon
9/30/2012 12:42:40 PM
The marketing mix is often referred to as the '4 Ps', i.e. product, price, place and
promotion. To meet customers' needs a business must develop products to satisfy
them, charge the right price, get the goods to the right place, and it must make the
existence of the product known through promotion.
RE:
Marketing Cary Mitchell
Price
9/30/2012 5:33:29 PM
I agree with you to meet customers needs a business has to have the right
place for promotional sales. If you do not do a marketing campaign they will
not get the information they need and the advertising may fail due to lack of
product placement in the market and right geographical area.
RE:
Marketing Timothy Rinard
Price
9/30/2012 11:46:08 PM
Some customers will actually go out of their way to go to different
stores just due to sales, or promotions, and can be a strong tool that is
used to draw people to your products/services. I have found that
many times when I am watching people at the store, they go in for
sales, and end up getting a bunch of things they did not intend on
getting, and sometimes the price is not even a sale. This means that
the store is successful in their marketing schemes, as people are
buying more even though they are having promotional deals.