Unit 7 Pricing strategies

Study Notes

Price: The amount paid for a product or service, encompassing all value exchanged for its benefits.
4Cs in Pricing: Factors to consider when setting prices: customers, current positioning, competitors, and costs.
Value-Based Pricing: Determines price based on the perceived value by the customer, rather than the seller's cost. This is customer-driven.
Cost-Based Pricing: Price is set based on the product's cost. This is product-driven. Price matches perceived value instead of cost.
Good-Value Pricing: Offers a balance of quality, service, and price.
Everyday Low Pricing (EDLP): Consistent low prices without temporary discounts.
High-Low Pricing: Regular higher prices combined with promotions to lower prices.
Value-Added Pricing: Adds features or services to a product to justify a higher price.

Cost-Plus Pricing: Adds a standard markup to product cost. This assumes sellers know their costs.
Benefits of Cost-Plus Pricing: Certain cost information, minimized price competition.

Market-Skimming: Introduces a high price for a new product initially to maximize profit. Quality and image are essential to sustain the high price.
Market-Penetration: Initial low price to maximize sales quickly. Costs decrease with larger sales volumes.
Product Line Pricing: Sets price steps across a product line based on cost differences, customer valuation, and competitor pricing.
Optional Product Pricing: Pricing of extra accessories or add-ons sold with the main product (e.g., phone and its case).
Captive Product Pricing: Pricing of products that are needed for a main product (e.g., inexpensive printer and expensive ink).
By-Product Pricing: Selling additional/secondary products gained from producing another product, for added revenue.
Product Bundle Pricing: Packaging multiple products together at a discounted price.
Discount Pricing: A straight reduction from base price to incentivize sales.
Allowance: Money paid by manufacturers to retailers in exchange for favored treatment.
Psychological Pricing: Setting the price in a way that conveys specific product attributes (e.g., "ending in .99").
Promotional Pricing: Short-term price reductions to boost sales.
Segmented/Differentiated Pricing: Creating price differences for segments of customers based on factors like location, time, or product type, without changing costs.