Pricing Strategy (BBPRICEX) (NU Dasmariñas) PDF

John Kenneth M. Arcayos, MBA Faculty, College of Business Administration Education that works.  STRATEGIC PRICING Coordinating the drivers of Profitability Week 1 STRATEGIC PRICING...

John Kenneth M. Arcayos, MBA Faculty, College of Business Administration Education that works.  STRATEGIC PRICING Coordinating the drivers of Profitability Week 1 STRATEGIC PRICING PRODUCT PRICE PLACE PROMOTION Week 1  STRATEGIC PRICING is the amount that consumers will be willing to pay for a product. Marketers must link PRICE the price to the product's real and perceived value, while also considering supply costs, seasonal discounts, competitors' prices, and retail markup. Pricing can be defined as the value customers sacrifice to benefit from receiving and using a good or service. Price is, therefore, the element of the marketing mix that leads to revenues, unlike the other elements which incur costs. Week 1  STRATEGIC PRICNG LEVERAGING PROFIT INTO SUSTAINABLE GROWTH Strategic pricing requires that management take responsibility for establishing a coherent set of pricing policies and procedures, consistent with the company’s strategic goals. Abdicating responsibility for pricing to the sales force or to the distribution channel is abdicating responsibility for the strategic direction of the business. Week 1  STRATEGIC PRICING The difference between successful and unsuccessful pricers lies in how they approach the process. To achieve superior, sustainable profitability, pricing must become an integral part of strategy. Strategic pricing often requires more than just a change in attitude; it requires a change in when, how, and who makes pricing decisions. For example, strategic pricing requires anticipating price levels before beginning product development. It requires determining the economic value of a product or service, which depends on the alternatives customers have available to satisfy the same need. Week 1  STRATEGIC PRICING COST PLUS PRICING This is a pricing method that sets the price at average cost and then adds an agreed level of profit. If successful, this will ensure a certain amount of profit per unit sold. Example: If a product is estimated to have an average cost of 6 pesos and the producer wishes to have a 50 percent profit market, the price is set at 9 pesos. If the firm wanted to earn 4 pesos on each item sold the selling price would be 10 pesos. Week 1  CUSTOMER DRIVEN PRICING Is a pricing strategy in which a company sets prices according to customer’s perceived value of its product and services. Week 1  SHARE DRIVEN PRICING The seller makes a decision based on the prices of its competition. It also focuses on determining a price that will achieve the most profitable market share and does not always mean the price is the same as a competition, it could be slightly lower. Week 1  The role of optimizing in Strategic Pricing A break even point is the point at which total revenue matches the total cost for a particular venture. This is determined through break even analysis, a process in which fixed and recurring costs are considered against anticipated sales or return on investment Week 1  Value Creation Why is value creation important? Value creation is an essential base to support a profitable and lasting business. Value creation for customers helps sell products and services, creating value for employees results in higher efficiency and creating value for shareholders translates into increase in stock price, future guarantee of investment capital How does value creation occur? Consequently, capital and resource allocation decisions are a critical part of how value is created and sustained. Investments in capital maintenance and development of strategic assets and capabilities such as talent, innovation, infrastructure, brand and intellectual assets enable value to be Week 1 created.  Value Communication Why is value communication is important in pricing strategy? The role of value and price communications, therefore, is to convey the value proposition in a compelling manner to accomplish three goals: Enable customers to fully understand the benefits; quantify the value of those benefits; and raise customers' willingness to pay for differentiating features and services. Week 1  Price Structure Price structure provides the foundation for prices by determining: 1. The time and conditions of payment. 2. The nature of discounts to be provided to buyers. 3. Where and when title is to be taken by buyers. 4. Who pays for the transportation of the goods and. how these charges are determined. Week 1 Pricing Policy, Setting and competition 1. Selecting the pricing objectives 2. Determining demand 3. Estimating costs 4. Analyzing competitors’ cost, prices, and offers 5. Selecting a pricing method 6. Selecting the final price Week 1 Week 1