Pricing Objectives Pricing Strategy Where does it fit

Pricing Objectives Pricing Strategy • Where does it fit in the overall management scheme? • Driven by top management priorities • Impacted by the marketing concept • Important when defining procedures to set prices • Who manages it inside the organization? • Top management • Marketing • Finance • How is it received outside the organization? • What to expect in terms of pricing • How the organization reacts to changes in costs versus price • How the organization reacts to changes in competitive pricing

Pricing Options Pricing Bases • Where does it fit in the overall management scheme? • Tactical implementation of a pricing strategy • Specific measurement points for making pricing decisions • Drives a demand for accounting and IT system reporting to support pricing • Who manages it inside the organization? • Marketing • Accounting • IT • How is it received outside the organization? • What drives pricing decisions • Which costs are focused on for pricing • How organizations arrive at a price

Product of Learning • Pricing is too often Emotional! Have a strategy and test! • Some of the silliest, least data-driven, and most emotional arguments you will have in your career will be about pricing • I wish I could tell you most organizations have a logical set of pricing practices, but that doesn’t match experience • Sellers tend to look at pricing from their own point of view and consider costs from their perspective rather than the consumer’s perspective • Sellers often have free use of a product, or can buy it at greatly reduced prices compared to consumers, so they don’t have the same references • A seller of collectible coins was selling an old silver dollar for $10 • The company was run by numismatists (coin collectors) who could buy as many as they needed for just under $10, and didn’t see it being worth more than that • Their marketing consultants suggested a test where they charged a higher price, and while they didn’t think it would work the company agreed to try it • When they tested pricing the coins at $20 each – they actually sold more coins – and they made over 10 times the margin!

Price Skimming and Penetration Pricing • Where does it fit in the overall management scheme? • Part of a new-product strategy • Impacted by the marketing concept • Financial resources and short to long term focus drive decisions • Who manages it inside the organization? • Top management • Marketing • Finance • How is it received outside the organization? • Will prices come down after a while when a new product is introduced • Is the organization aggressive in building market share with a new product • How does the organization weigh profits today versus repeat sale profits

Pricing Psychology • Where does it fit in the overall management scheme? • May be strategic or tactical • May drive product design to fit a price • May require financing or offers of multiple payments • Who manages it inside the organization? • Marketing • Research • Sales • How is it received outside the organization? • Do prices look like good deals • Are prices and products designed together for affordability • May be less important to buyers than it seems based on seller behavior

Bundling • Where does it fit in the overall management scheme? • A crucial role of the marketing role • Cuts across product design, packaging, and distribution • Impacts choice of what is included in the product, size, and quantity • Who manages it inside the organization? • Marketing • Design and manufacturing • Distribution and logistics • How is it received outside the organization? • Value versus price • Specifically suited for a market or customer • Includes what is desired, does not include what is not desired

Weber's Law • Where does it fit in the overall management scheme? • Pricing strategy and tactics • How often and to what degree price changes are made • How much change in cost is enough to trigger a price change • Who manages it inside the organization? • Top management • Finance • Marketing • How is it received outside the organization? • Whether or not to expect price changes, such as every year • May be enough to turn buyers to alternatives • Keeping changes within buyer expectations supports relationships

Product of Learning • Planning for price Increases! • Large price increases get noticed • When prices stay the same, regular customers don’t have to re-think value • Plan for increasing costs so they are not a surprise when they occur • Consider customer satisfaction, as happy customers are more tolerant of price increases • Think about how to increase prices • Introducing product improvements is a good time to increase prices if customers see the value. • Consider quantity or weight decreases rather than price increases • Re-think bundles and what is or is not included

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