Fuel Supply & Price UncertaintyCheaper Power Demand by Consumer
Pricing Strategies Part 1: The Matrix. Consumer Demand Consumer demand always sets the price: if the...
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Transcript of Pricing Strategies Part 1: The Matrix. Consumer Demand Consumer demand always sets the price: if the...
Pricing Strategies
Part 1: The Matrix
Consumer Demand
Consumer demand always sets the price: if Consumer demand always sets the price: if the consumer feels the price is too expensive, the consumer feels the price is too expensive, they may feel the value of the good or service they may feel the value of the good or service is lessis less
It is always easier to start high and drop the It is always easier to start high and drop the price to increase the perceived value than to price to increase the perceived value than to increase later and risk the value being lostincrease later and risk the value being lost
Consumer Demand
Price is sensitivePrice is sensitive, , meaning that meaning that fluctuations in price fluctuations in price cause fluctuations in cause fluctuations in demand (the basis of demand (the basis of economics)economics)
Pricing Strategies
There are There are fourfour pricing strategies to consider: pricing strategies to consider:
Economy PricingEconomy Pricing
Penetration PricingPenetration Pricing
Price SkimmingPrice Skimming
Premium PricingPremium Pricing
Economy Pricing
Costs of both manufacturing and marketing Costs of both manufacturing and marketing are kept to the minimumare kept to the minimum
Prices are the lowest possible as a resultPrices are the lowest possible as a result
Penetration Pricing
Introductory prices are kept intentionally low Introductory prices are kept intentionally low in order to gain market sharein order to gain market share
Once the customer is enjoying the good or Once the customer is enjoying the good or service on a regular basis, the price can service on a regular basis, the price can increaseincrease
Price Skimming
Companies exploit their competitive advantage by Companies exploit their competitive advantage by starting with a high price to match their raritystarting with a high price to match their rarity
High prices = high income, and competitors will High prices = high income, and competitors will enter the market for a portion of that initial profitenter the market for a portion of that initial profit
More competitors increases the supply, and so the More competitors increases the supply, and so the price drops to keep the product competitive price drops to keep the product competitive
Premium Pricing
The uniqueness of the product allows the The uniqueness of the product allows the producers to keep the price highproducers to keep the price high
Usually, there is a substantial competitive Usually, there is a substantial competitive advantage that allows the higher price to be advantage that allows the higher price to be accepted in the marketaccepted in the market
Premium pricing is usually associated with Premium pricing is usually associated with luxury itemsluxury items
Pricing Strategies Matrix
Additional Pricing Policies
use your textbook to define the terms on worksheet Iuse your textbook to define the terms on worksheet I