Business
Pricing Models
Pricing models refer to the strategies and methods used by businesses to set the prices of their products or services. These models can include cost-plus pricing, value-based pricing, competitive pricing, and dynamic pricing, among others. The choice of pricing model depends on factors such as market conditions, customer demand, and the company's overall business strategy.
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6 Key excerpts on "Pricing Models"
eBook - PDF- Mark S. Glynn, Arch G. Woodside, Mark S. Glynn, Arch G. Woodside(Authors)
- 2009(Publication Date)
- Emerald Group Publishing Limited(Publisher)
Fifth, behavioral models of pricing strategies deepen our knowledge and insight into the thinking and choice processes of these strategists. Behavioral Pricing Models complement the work of pricing system modeling. Behavioral Pricing Models focus on microcontextual phenomena of linkages among pricing thoughts and choices; pricing system models are descriptions of the macrophenomena of the organization’s pricing policies and outcomes. Pricing Theory and Practice in Managing B2B Brands 477 Deepening our knowledge about both is necessary for making better pricing decisions. The appendix gives you the opportunity to work as a consulting on a real-life pricing case. Consider reading the case and sending your one-to two-page solution to both of the authors by email and ask for an assessment of your report. REFERENCES Acito, F., & Hustad, T. P. (1981). Industrial product concept testing. Industrial Marketing Management , 10 (2), 157–164. Adams, W. J., & Yellen, J. L. (1976). Commodity bundling and the burden of monopoly. Quarterly Journal of Economics , 90 (3), 475–498. Anderson, J. C., Jain, D. C., & Chintagunta, P. K. (1993). Customer value assessment in business markets: A state of practice study. Journal of Business-to-Business Marketing (1), 3–30. Berger, P. L., & Luckmann, T. (1966). The social construction of reality: A treatise in the sociology of knowledge . New York, NY: Irvington Publishers, Inc. Blattberg, R., Buesing, T., Peacock, P., & Sen, S. (1978). Identifying the deal prone segment. Journal of Marketing Research , 15 (3), 369–377. Bonoma, T. V. (1984). Managing marketing . New York, NY: The Free Press. Bonoma, T. V., Crittenden, V. L., & Dolan, R. F. (1988). Can we have rigor and relevance in pricing research? In: T. M. Devinney (Ed.), Issues in pricing: Theory and research (pp. 337–408). Lexington, MA: D.C. Heath. Buzzell, R. D., & Gale, B. T. (1987). The PIMS principles . New York, NY: Free Press.
eBook - PDFManagerial Economics
The Analysis of Business Decisions
- Stephen Hill(Author)
- 2016(Publication Date)
- Red Globe Press(Publisher)
CHAPTER9 Pricing decisions Contents INTRODUCTION 208 A GENERAL PRICING MODEL 209 MONOPOLY AND ENTRY 210 PRICING NEW PRODUCTS 213 PRICING ESTABLISHED PRODUCTS 216 PRICING STRATEGIES 218 EMPIRICAL PRICING EVIDENCE 225 SUMMARY AND CONCLUSIONS 227 APPLICATION 9 229 Introduction Pricing is a decision area which draws together contributions from the theories of demand, cost and market structure. The pricing decision has been the major focus of economic theory in the analysis of resource allocation, but its position in managerial economics is more limited. In the analysis of business decision-making, pricing is just one element in a comprehensive competitive strategy. More-over, the pricing decision is a means to an end, and not the end in itself, so that decisions about price must be considered in the context of overall business objectives. As we shall see, price is a strategic as well as an operational variable, so that pricing decisions can have a profound effect on future as well as present performance. Because of this time dimension, pricing objectives need to be carefully defined. For example, setting a low current price may be an optimal decision if the consequent establishment of a dominant market position leads to long-run profits sufficient to outweigh any short-run profit sacrifice. The purpose of this chapter is to derive a pricing policy, in the 208 Pricing decisions 209 form of some general pricing rules, which can be used to govern pricing behaviour. In doing so, we shall consider pricing only from the seller's viewpoint, which means leaving the implications of pricing behaviour from the consumer's or society's point of view to that body of theory known as welfare economics. Merely to consider the determination of a pricing policy is to assume that the seller has some discretion over price, i.e. that the market situation is not perfectly competitive.
eBook - PDFStrategic Marketing Management in Asia
Case Studies and Lessons across Industries
- Syed Saad Andaleeb, Khalid Hasan(Authors)
- 2016(Publication Date)
- Emerald Group Publishing Limited(Publisher)
13 ▾ Pricing Strategy Rajesh C. Jampala Pricing is one of the most important elements of the marketing mix and has come to take center-stage in marketing warfare. It is a complex task and there is a science and art to pricing. To fix a successful price one has to depend on the scientific approach by carefully using metrics as well as intuition and judgment. This chapter provides an exposure to the various approaches to pricing that marketers usually rely upon. Emerging business models highlight the value framework, which deals with marketing as a process of creating, communicating, and delivering value to the customers. As businesses face cut-throat competition, the emphasis should be on capturing and delivering value of the offering rather than on price. One simple way to understand the difference between price and value is through the statement: what a customer pays is price and what customer gets is value . By increasing the benefits and by reducing the cost to the customer, marketers can enhance the value of the offering. Hence, pricing should be based on value; capturing value is its purpose. Virtually all companies want to set prices near the value that their products and services deliver to the customers. This requires a strategic shift from cost-or-competition-based pricing with low price-realization capabilities to customer value-based price setting with high price-realization capabilities. 383 A selected price should also be consistent with other variables in the marketing mix. It should fit with the realities of the market-place and also achieve the financial goals such as desirable profit. From the firm ’ s point of view, an efficient price is a price that is very close to the maximum that customers are prepared to pay. In economic terms, it is a price that transfers most of the consumer surplus to the producer. In the words of famous investor Warren Buffet “ The single most important decision in evaluating a business is pricing power.
- Donald F. Blumberg(Author)
- 2002(Publication Date)
- CRC Press(Publisher)
Regardless of whether the firm is servicing an existing market with mature services, a new product with new services, or an existing market with new services, a manager must make pressing decisions based on valid and reliable business intelligence and market data. Pricing decisions can not be made on intuition alone or solely on internal cost data. The consequences may be negative towards financial performance and long term business growth. Summary of Implementing a Pricing Strategy In summary, calculation of servicing pricing must become much more sophisticated if service organizations are to survive and prevail in the growing, increasingly competitive service market. It is important to rec-ognize the existence of alternative strategies, as well as methods, for pricing individual services with particular emphasis on the fixed price, value-in-use approach. Pricing in the service market is in a state of transition. The most typical approach is time and materials with higher rates for added value or extended services. Other pricing strategies includ-ing fixed-price contracts based on a value-in-use strategy are being increas-ingly utilized. In the traditional approach of using cost-plus-mark-up or competitive pricing, the tendency is to enter into price reductions. How-ever, it is extremely important to note that one must achieve a significant increase in sales volume as a result of even a minor price reduction in order to maintain the same gross profit margins that were in existence before the price change. In essence, service vendors should be extremely careful in developing their service prices and particularly in reducing their service prices in the face of competition in order to gain market share. Our market research clearly shows the existence of a significant percentage of the market that is price insensitive. Thus, in general, the development of service prices should be driven by calculation of value in use as well as competitive and cost-plus pricing.
eBook - ePub- Paul Reynolds, Geoff Lancaster(Authors)
- 2005(Publication Date)
- Routledge(Publisher)
Marketing management should devise a pricing strategy that is compatible with strategies attached to other elements of the marketing mix. It is not always possible to set a price and apply this rigidly to all customers in all market situations. A pricing strategy denotes how a company will price its products at particular periods of time or particular market conditions. Demand-orientated pricing sets a base price that the company must endeavour to achieve, but it assumes that price be modified in line with changes in demand. Manufacturers must realise that customers are not the same. Some will purchase greater quantities than others, or be situated in areas that are more costly to reach.If a target-return-on-investment price is set, this may only be appropriate during the maturity stage of the product life cycle that was explained in the last chapter. During introduction or growth, it is often necessary to employ a pricing strategy that will enable the target return to be achieved over the long term.A company’s ability and willingness to formulate pricing strategies is a reflection of its willingness to adapt and modify price according to the needs of customers and market conditions.7.6.1 Discounting
The discount structure a company employs is a major element of pricing strategy and an indicator of the firm’s flexibility. If customers buy products in large quantities, they may reasonably expect to be charged a lower price than that charged to smaller purchasers. The seller may also offer discounts voluntarily in order to encourage large orders that facilitate economies of scale and assist effective production planning. Such quantity-related discounts can refer to individual orders or be based on an estimated off-take that is planned over a given period. In certain markets, price discounting is important. Day and Ryans (1988 ) say that if used with imagination and creativity they can provide a firm with a strong competitive advantage.Manufacturers can offer discounts to encourage sales of a new product or accelerate demand for a product whose stocks are high, owing to seasonal or cyclical demand variations. In the production context, it is desirable that a constant rate of output is maintained. If market conditions are not conducive to this, a price modification by means of discounting might encourage sales sufficiently to counteract variations in levels of demand.
eBook - PDFNew Product Development
from Initial Idea to Product Management
- Marc Annacchino(Author)
- 2003(Publication Date)
- Butterworth-Heinemann(Publisher)
Competitor #1 initiates an offering with X as the price. Competitor #2 responds with a revised price (X’), and you respond to the marketplace with (X”). Competitor #3 is nonreactive in keeping price (X) during the interchange. In this way the market is dynamic and competitors are participating in pricing exercises based on competitive price levels. Other Strategies: Situational and Value Pricing There are other pricing strategies that are situation specific and are based on value, which are summarized as follows: A. New product introductions B. Pricing when intangibles are important C. Pricing in oligopolies D. Pricing when buying is habitual E. Pricing to reflect buyer-behavior attitudes These are basically offshoots or temporary applications of the previously discussed examples in order to gain advantage in certain situations. They, along with pricing over the product life cycle, will be covered in more detail in Chapter 11. Whatever the strategy or for whatever the goal, pricing must reflect value to the customer and allow for profit to the corporation. It is therefore a key component to the business plan and must be well considered. 5. BUNDLED VERSUS UNBUNDLED PRICING STRATEGIES The other consideration in pricing is the use of bundled and unbundled pricing. In this case the package of values can be adjusted to suit the market, by including collateral goods The Product and Business Plan 167 Figure 4-14. Competition Pricing and services with the product to make the entire package more appealing to the customer. These can be very popular and very successful as consumers begin to examine total installed costs in which bundling can lower their outlay for the entire package of goods and services.
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