DOCSLIB.ORG

Strategic Pricing Methods

Total Page：16

File Type：pdf, Size：1020Kb

Download full-text PDF Read full-text
Strategic Pricing Methods gre29007_ch15_452-479.indd Page 453 10/11/12 4:27 PM user-t044 /Volumes/202/MH01856/gre29007/disk1of1/0078029007 CHAPTER 15 Strategic Pricing Methods eeply discounted products or services cause find appealing but have been unwilling to try, whether retailers to lose money. However, if these pro- because they appear frivolous (e.g., spa services) or motions accomplish other because of cost (e.g., hot air balloon strategic goals, such as rides). D LEARNING OBJECTIVES bringing in new customers, they can Although Groupon searches for be tremendously valuable. Success de- deals with companies that demand LO1 Identify three meth- pends on reaching a wide audience of few fine-print restrictions, the site at- ods that firms use to interested consumers with a deal that set their prices. taches its own strings to discounts: A can’t be ignored. Finding the model minimum number of people must sign LO2 Describe the differ- that delivers this one-two punch is the ence between an up before the promotion takes effect. genius behind Groupon.com. everyday low price This caveat motivates users to Every day, Groupon alerts its us- strategy (EDLP) and spread the word, mostly through so- ers to several “featured deals.”1 The a high/low strategy. cial networking sites. Without a mini- discounts are organized according to LO3 Explain the difference mum number of buyers, the discount the major U.S. cities that Groupon between a price does not apply, and no one receives skimming and a serves, offered to site users who live market penetration the deal. in or near those markets. A woman liv- pricing strategy. So far though, maximums have ing in New York, for example, receives been more of an issue than minimums. LO4 Identify tactics used offers for discounts to nail salons to reduce prices to The Chicago Art Institute promotion nearby. Economically, the deals are at- consumers. added 5,000 new members, an im- 2 tractive: $10 worth of pizza for $5, a LO5 Identify tactics used pressive addition to the 85,000 mem- 64 percent discount on a membership to reduce prices to bers the museum had accumulated in to the Chicago Art Institute, or nearly businesses. the previous 100 years. The owner of half off interactive cooking classes LO6 List pricing practices the pizza chain offering 50 percent off that culminate with a four-course that have the coupons had 9,000 responses. gourmet meal. 3 They often revolve potential to deceive Business owners, Groupon warns, customers. around social events, like classes or need to be ready for this kind of inter- dining out, and encourage access to est. Some small businesses cap their goods or services that customers may offers to avoid overwhelming staff or CHAPTER 15 453 gre29007_ch15_452-479.indd Page 454 10/11/12 4:27 PM user-t044 /Volumes/202/MH01856/gre29007/disk1of1/0078029007 454 Section Five Value Capture frustrating customers who may have to wait months for Goods,” it makes clear that the offers are first come, first an appointment. served. Groupon itself faces an avalanche of interest from At a time when retailers are investing their marketing site users and businesses. A still struggling economy cre- dollars with great care, Groupon’s payment structure en- ates appeal among users, which has triggered growth courages businesses to sign on. If the promotion is suc- rates of up to 25 percent in just one month. Groupon has cessful, Groupon takes a share of the profits. If it’s sold more than 22 million deals to its approximately 50 unsuccessful, neither Groupon nor the company makes million subscribers, 4 and most of these users are young money. But even if actual redemption rates are high, professionals in their 20s and 30s, a highly desirable tar- many firms question whether Groupon promotions suffi- get market. ciently generate long-term customers.5 Many may try the Businesses see Groupon as a cost-effective way to promotion once, and never come back. Worse yet, if the bring in new customers; 120 were lined up for promo- promotion is too successful, and the firm is unable to ad- tions in Chicago, where Groupon launched in 2008, and equately satisfy demand, customers will become disgrun- Groupon has expanded to other cities. Investors are also tled, never to return again, and potentially spread negative excited about Groupon’s business model because it reviews to their friends and in social media. doesn’t involve inventory or shipping (users print The future of the daily deal is unknown. Analysts be- Groupon’s coupon and bring it to the vendor). Finally, be- lieve that Groupon and other daily deals will be absorbed cause most offers are intangibles, such as services or by larger online entities, and that companies like Amazon, classes instead of products or goods, Groupon rarely Google, and Facebook will have a daily deal as part of faces the problems with stock-outs that other group buy- their marketing strategy. Few daily deals are expected to ing sites suffer. Even as it has expanded into “Groupon survive as independent businesses. Coming up with the “right” price is never easy, as the opening example shows. How might this new option for finding deals cause shifts overall—both in what consumers are willing to pay and in what manufacturers can charge? What kinds of effects might Groupon have on future sales of products and services that cus- tomers first find on this deal site? What other members of the market might such price changes affect? To answer such questions, we examine various pricing strat- egies in this chapter. Chapter 14 was devoted to examining what “price” is, why it is important, how marketers set pricing objectives, and the factors that influence prices. In this chapter, we extend that foundation by focusing on specific considerations for set- ting pricing strategies and then discuss a number of pricing strategies. We also examine the implications of various pricing tactics for both consumers and busi- nesses, as well as some of the more important legal and ethical issues associated with pricing. LO1 Identify three methods CONSIDERATIONS FOR SETTING that firms use to set their prices. PRICE STRATEGIES Firms embrace different objectives, face different market conditions, and operate in different manners. Thus, they employ unique pricing strategies that seem best for the particular set of circumstances in which they find themselves. Even a single firm needs different strategies across its products and services and over gre29007_ch15_452-479.indd Page 455 10/11/12 4:28 PM user-t044 /Volumes/202/MH01856/gre29007/disk1of1/0078029007 Strategic Pricing Methods Chapter Fifteen 455 EXHIBIT 15.1 Pricing Strategies Value-Valu basebabased pricingii ComCompetitor- based pricing CoCost-baseds pricing time as market conditions change. The choice of a pricing strategy thus is spe- cific to the product/service and target market. Although firms tend to rely on similar strategies when they can, each product or service requires its own spe- cific strategy, because no two are ever exactly the same in terms of the marketing mix. Three different methods that can help develop pricing strategies—cost- based, competitor-based, and value-based—are discussed in this section (see Exhibit 15.1). Cost-Based Methods As their name implies, cost-based pricing methods determine the final price to charge by starting with the cost. Relevant costs (e.g., fixed, variable, overhead) and a profit are added. Then this total amount is divided by the total demand to arrive at a cost-plus price. For example, assume the fixed costs to produce an item are $200,000, the variable costs add up to $100,000, and the estimated number of units to be produced is 30,000. Then, (100,000 ϩ 200,000) Ϭ 30,000 ϭ $10 which is the total allocated cost per unit when 30,000 units are produced. If the desired markup is 20 percent, we multiply $10 by 1.20 (i.e., by 100 1 20 5 120 per- cent) to attain the cost-plus price for this item: $12. This sales price represents a cost-plus-percentage markup. Cost-based methods do not recognize the role that consumers or competitors’ prices play in the marketplace though. Although they are relatively simple, com- pared with other methods used to set prices, cost-based pricing requires that all costs be identified and calculated on a per-unit basis. Moreover, the process as- sumes that these costs will not vary much for different levels of production. If they do, the price might need to be raised or lowered according to the production level. Thus, with cost-based pricing, prices are usually set on the basis of estimates of average costs. Competition-Based Methods Recall from Chapter 14 that some firms set prices according to their competitors’ prices. But even if they do not have a strict competitor orientation, most firms still gre29007_ch15_452-479.indd Page 456 10/11/12 4:28 PM user-t044 /Volumes/202/MH01856/gre29007/disk1of1/0078029007 456 Section Five Value Capture know that consumers compare the prices of their products with the different product/price combinations that competitors offer. Thus, using a competition- based pricing method , they may set their prices to reflect the way they want con- sumers to interpret their own prices, relative to competitors’ offerings. For example, setting a price very close to a competitor’s price signals to consumers that the product is similar, whereas setting the price much higher signals greater features, better quality, or some other valued benefit. Value-Based Methods Value-based pricing methods include approaches to setting prices that focus on the overall value of the product offering as perceived by the consumer.
Load more

Recommended publications
  • Marketing-Strategy-Ferrel-Hartline.Pdf
    Copyright 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. Marketing Strategy Copyright 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. This is an electronic version of the print textbook. Due to electronic rights restrictions, some third party content may be suppressed. Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. The publisher reserves the right to remove content from this title at any time if subsequent rights restrictions require it. For valuable information on pricing, previous editions, changes to current editions, and alternate formats, please visit www.cengage.com/highered to search by ISBN#, author, title, or keyword for materials in your areas of interest. Copyright 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).
    [Show full text]
  • Skimming Or Penetration? Strategic Dynamic Pricing for New Products
    This article was downloaded by: [113.197.9.114] On: 26 March 2015, At: 16:51 Publisher: Institute for Operations Research and the Management Sciences (INFORMS) INFORMS is located in Maryland, USA Marketing Science Publication details, including instructions for authors and subscription information: http://pubsonline.informs.org Skimming or Penetration? Strategic Dynamic Pricing for New Products Martin Spann, Marc Fischer, Gerard J. Tellis To cite this article: Martin Spann, Marc Fischer, Gerard J. Tellis (2015) Skimming or Penetration? Strategic Dynamic Pricing for New Products. Marketing Science 34(2):235-249. http://dx.doi.org/10.1287/mksc.2014.0891 Full terms and conditions of use: http://pubsonline.informs.org/page/terms-and-conditions This article may be used only for the purposes of research, teaching, and/or private study. Commercial use or systematic downloading (by robots or other automatic processes) is prohibited without explicit Publisher approval, unless otherwise noted. For more information, contact [email protected]. The Publisher does not warrant or guarantee the article’s accuracy, completeness, merchantability, fitness for a particular purpose, or non-infringement. Descriptions of, or references to, products or publications, or inclusion of an advertisement in this article, neither constitutes nor implies a guarantee, endorsement, or support of claims made of that product, publication, or service. Copyright © 2015, INFORMS Please scroll down for article—it is on subsequent pages INFORMS is the largest professional society in the world for professionals in the fields of operations research, management science, and analytics. For more information on INFORMS, its publications, membership, or meetings visit http://www.informs.org Vol.
    [Show full text]
  • Chapter 15 – Marketing Past Marketing Questions
    CHAPTER 15 – MARKETING PAST MARKETING QUESTIONS 2019 - EXPLAIN THE FACTORS TO BE 2019 – OUTLINE THE PRICING STRATEGY BEST SUITED 2019 – DESCRIBE THE ROLE OF PUBLIC RELATIONS (PR) CONSIDERED BEFORE DECIDING ON THE PRICE (i) TO THE INTRODUCTORY STAGE AND EXPLAIN IN A BUSINESS (i) 1. Production costs 6. Demand in the marketplace THE REASON FOR YOUR CHOICE (ii) 1. Efforts used by a business to create and maintain good public image 2. Competition 7. Consumer Expectation (Image) Penetration Pricing -The business competes for a large share of the market 2. It aims to achieve favourable publicity and build a good corporate image 3. Taxation (import charges) 8. Product Positioning using price. The business tries to capture as much market share as possible. 3. Its concern is the long-term objective of promoting a favourable image 4. Stage of Product Life Cycle 9. Legal Restrictions 4. Defend the reputation of the business from criticism (in times of This would be suitable if if targeted at the ‘lunch box’ / mass market. 5. Target Market business? /status of the brand? Skimming - The business charges a high price to ‘cream off’ the premium crisis). section of the market. This would be suitable if the product is to be aimed 5. It is not directly linked to increasing sales but rather to increasing the Remember to explain the ones you choose at the high end of the market such as gyms, professional athletes. reputation of the business which in turn increases sales. 2019 – DISCUSS THE METHODS TO DEVELOP GOOD 2019 -OUTLINE THE FACTORS TO BE CONSIDER 2019 - EXPLAIN THE TERM NICHE MARKET & PROVIDE PR, PROVIDE EXAMPLES (ii) WHEN DESIGNING THE PACKAGING FOR THE BRAND.
    [Show full text]
  • PRICING RESEARCH in MARKETING.Pdf
    HANDBOOK OF PRICING RESEARCH IN MARKETING Handbook of Pricing Research in Marketing Edited by Vithala R. Rao Cornell University, USA Edward Elgar Cheltenham, UK • Northampton, MA, USA © Vithala R. Rao 2009 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical or photocopying, recording, or otherwise without the prior permission of the publisher. Published by Edward Elgar Publishing Limited The Lypiatts 15 Lansdown Road Cheltenham Glos GL50 2JA UK Edward Elgar Publishing, Inc. William Pratt House 9 Dewey Court Northampton Massachusetts 01060 USA A catalogue record for this book is available from the British Library Library of Congress Control Number: 2008943827 ISBN 978 1 84720 240 6 Printed and bound in Great Britain by MPG Books Ltd, Bodmin, Cornwall Contents List of contributors vii Foreword xix Acknowledgments xxi Introduction 1 Vithala R. Rao PART I INTRODUCTION/FOUNDATIONS 1 Pricing objectives and strategies: a cross-country survey 9 Vithala R. Rao and Benjamin Kartono 2 Willingness to pay: measurement and managerial implications 37 Kamel Jedidi and Sharan Jagpal 3 Measurement of own- and cross-price effects 61 Qing Liu, Thomas Otter and Greg M. Allenby 4 Behavioral pricing 76 Aradhna Krishna 5 Consumer search and pricing 91 Brian T. Ratchford 6 Structural models of pricing 108 Tat Chan, Vrinda Kadiyali and Ping Xiao 7 Heuristics in numerical cognition: implications for pricing 132 Manoj Thomas and Vicki Morwitz 8 Price cues and customer price knowledge 150 Eric T. Anderson and Duncan I. Simester PART II PRICING DECISIONS AND MARKETING MIX 9 Strategic pricing of new products and services 169 Rabikar Chatterjee 10 Product line pricing 216 Yuxin Chen 11 The design and pricing of bundles: a review of normative guidelines and practical approaches 232 R.
    [Show full text]
  • Price Skimming Definition and Examples
    Price Skimming Definition And Examples Prodromal and self-involved Andres animalizes her professorships policy carjack and sectarianises confidently. Rotted or irreformable, Hillel never outgunned any Barbados! Ferroelectric and needy Lion abominate unyieldingly and apprize his tagmeme aerodynamically and lucratively. You buy competitor at different decisions on basis point is neither evil nor is useful post questions: competitors always set different spheres of examples and price skimming definition what does not maximize sales Examples and definitions included! More and examples can. A recent work example call this clutter the initial release draw the Apple iPhone. Cookies and skimming definition for example, skim is skimmed off notifications anytime using this strategy! Price Skimming Definition Examples & Strategy Video. Price skimming examples and definitions will consider whether that can be buying from fewer customers expect if consumers. Scanning skill in free promotions are examples and she is an it must be. Use skimming to trigger get rear to speed on a diamond business situation. By skimming examples here, skim and definitions included in skimming happens again back. What department The Dividend Policy toward Business? Mason a lot of customers may be unable to use of competition makes much on price skimming definition and examples how can be considered as established product release at premium pricing in some means the. BUS203 Demand-Based Pricing Saylor Academy. We use a new goods be same provider nor is grasped in process involves difficult to! Execute it at lower profits in marketing costs and more moderate their product can be ready to buy? What is skimming and definitions will purchase.
    [Show full text]
  • Business School Working Paper
    Business School Working Paper UNSW Business School Research Paper No. 2014 ECON 40 Life Cycle Price Trends and Product Replacement: Implications for the Measurement of Inflation Daniel Melser Iqbal A. Syed This paper can be downloaded without charge from The Social Science Research Network Electronic Paper Collection: http://ssrn.com/abstract=2538315 business.unsw.edu.au Last Updated 29 July 2014 CRICOS Code 00098G Life Cycle Price Trends and Product Replacement: Implications for the Measurement of Inflation Daniel Melser Iqbal A. Syed* Moody's Analytics School of Economics and CAER Level 11, 1 O'Connell St University of New South Wales Sydney, NSW 2000 Sydney, NSW 2052 Australia Australia Phone: +61-8-6143 7106 Phone: +61-2-9385 9732 Email: [email protected] Email: [email protected] October 28, 2014 Abstract: The paper explores the extent to which products follow systematic pricing patterns over their life cycle and the impact this has on the measurement of inflation. Using a large US scanner data set on supermarket products and applying flexible regression methods, we find that on average prices decline as items age. This life cycle price change is often attributed to quality difference in the construction of CPI as items are replaced due to disappearance or during sample rotations. This introduces a systematic bias in the measurement of inflation. For our data we find that the life cycle bias leads to the underestimation of inflation by around 0.30 percentage points each year for the products examined. JEL Codes: C43, D22, E31 Keywords: Consumer price index (CPI); matched-model index; price skimming strategy; quality change bias; sample rotation * Corresponding author.
    [Show full text]
  • An Examination of Factors That Affect Pricing Decisions for Export Markets
    An Examination of Factors that Affect Pricing Decisions for Export Markets Etienne Musonera, College of Business, Eastern New Mexico University, USA Uzziel Ndagijimana, National University of Rwanda, Butare, Rwanda ABSTRACT Pricing strategy has played an important role in consumer purchasing behavior and decision making process (Richard, 1985; Myers, 1997). For international markets, pricing is one of the most important elements of marketing product mix, generates cash and determines a company’s survival (Yaprak, 2001). However, scholars have not paid enough attention to international and export pricing (Kotabe and Aulak, 1993); Graham and Gronhaug, 1987). This paper examines factors that affect pricing decision for export markets, and sheds light on international pricing strategies in a global competitive market. INTRODUCTION Marketing theory states clearly that price is one of the 5 P’s (Product, Positioning, Place, Promotion and Price) that contributes to the marketing mix in order to get potential customers’ attention, motivate them, and get them to buy products or services. The marketing strategy helps you define, promote and distribute your product, and maintain a relationship with your customers. Pricing, as part of the marketing mix, is essential and has been always one of the most difficult decisions in marketing because of heightened competition (Myers 1997), gray market activities (Assmus and Wiese, 1995), counter-trade requirements (Cavusgil and Sikora ,1988), regional trading blocks (Weekly, 1992), emergency of intra-market segments (Dana 1998), and volatile exchange rates (Knetter, 1994). Consumers have different perception of the products depending on the price. Therefore, pricing products for consumers is a difficult task, mainly because a high price may cause negative feelings about products, and also a low price can be misleading on other products features such as quality.
    [Show full text]
  • Table of Contents Marketing Principles and Processes
    Table of Contents Marketing Principles and Processes Module 1: What is Marketing? Marketing is about customers, processes, and profits 1. What is Marketing? 2. The History of Trading and Wealth Creation How world trade got started 3. Master Traders 4. Global Trading System Dynamics 5. A Theory of Market Dynamics Product innovation life-cycle 6. Process Improvement Business Process Thinking Scale Cases Case 1: Cyrus McCormick: Understanding the Importance of Marketing Processes and Product Innovation Case 2: Southwest Airlines: Superb Processes Invented and Implemented by Superb Process Thinkers Case 3: The Future of the “We-Market-They-Make” Business Model Case 4: The Chinese Gooseberry Story: The Inevitability of the Global Innovation-Imitation Process Case 5: Excellence in the Wrong Direction Slideshow The Big Picture · Marketing and Humanity · Prosperity and Wealth Creation · The Schumpeter Wealth Creation Principle · The Smith Wealth Creation Principle · Marketing and Wealth Creation · The Wealth Creation Dynamic · The Wealth Creation Feedback Effect · The Wealth of Nations · Trading and Wealth Creation · A Short Story of Civilization · Global Trading System Dynamics · Global Trading Implications · Understanding Supply and Demand · A Theory of Market Dynamics · The Product Innovation Life-Cycle · Creative Destruction · Thinking about Competitive Processes · The Big Picture Module 2: Analysis and Planning: Chance favors the prepared mind 1. Analyzing Competition Auditing current competitors 2. Analyzing Channels Researching individual
    [Show full text]
  • Price Is an Important Marketing Mix Tool for Both Creating and Capturing Customer Value
    1 Price is an important marketing mix tool for both creating and capturing customer value. You explored the three main pricing strategies—customer value-based, cost- based, and competition-based pricing—and the many internal and external factors that affect a firm’s pricing decisions. In this chapter, we’ll look at some additional pricing considerations: new-product pricing, product mix pricing, price adjustments, and initiating and reacting to prices changes. We close the chapter with a discussion of public policy and pricing. this 2 Pricing strategies usually change as the product passes through its life cycle. The introductory stage is especially challenging. Companies bringing out a new product face the challenge of setting prices for the first time. They can choose between two broad strategies: market-skimming pricing and market-penetration pricing. Market-Skimming Pricing Many companies that invent new products set high initial prices to skim revenues layer by layer from the market. Apple frequently uses this strategy, called market- skimming pricing (or price skimming). When Apple first introduced the iPhone, its initial price was as much as $599 per phone. The phones were purchased only by customers who really wanted the sleek new gadget and could afford to pay a high price for it. Six months later, Apple dropped the price to $399 for an 8GB model and $499 for the 16GB model to attract new buyers. Within a year, it dropped prices again to $199 and $299, respectively, and you can now buy a basic 8GB model for $49. In this way, Apple has skimmed the maximum amount of revenue from the various segments of the market.
    [Show full text]
  • Business Strategy and Pricing
    RELEVANT TO ACCA QUALIFICATION PAPER P3 Studying Paper P3? Performance objectives 7, 8 and 9 are relevant to this exam BUSINESS STRATEGY AND PRICING The revised Paper P3 Study Guide now includes an additional learning objective, E3e: ‘Describe a process for establishing a pricing strategy that recognises both economic and non-economic factors’. This is an extension to the learning objective E3d which refers to the effect of e-marketing on the traditional marketing mix of product, promotion, price, place, people, processes and physical evidence. It is, of course, appropriate for accountants to specialise in the determination of price as this can relate closely to other accounting measures such as costs, revenues and profits. Additionally, altering the price of a product will usually allow much faster changes to organisational performance than developing products or designing and running promotional campaigns. This article looks first at the influences on prices and then at specific approaches. The influences on prices The influences on prices can be summarised by the following diagram: • Mission and marketing objectives • Pricing objectives Costs Competition Customers Controls • Marginal • Type of market • Consumers • Statute • Total absorption • Price competition • Intermediaries • Regulation • Opportunity • Non-price competition • Perceived value of the goods • Contract • Other marketing mix • Nature of the goods variables Although there might appear to be a natural or normal order in which to deal with these influences, if must be emphasised that, as in all of strategic planning, the process is likely to be iterative. One might have a marketing objective in mind but then find that it will be impossible to achieve it because of cost or competition issues, so the objective has to be revisited.
    [Show full text]
  • Understanding the Price Drivers of Successful Apps in the Mobile App Market
    Int. J. Electronic Marketing and Retailing, Vol. 7, No. 2, 2016 159 Understanding the price drivers of successful apps in the mobile app market Paolo Roma* DICGIM – Management and Economics Research Group, Università degli Studi di Palermo, Viale delle Scienze, 90128, Palermo, Italy Email: [email protected] *Corresponding author Gandolfo Dominici SEAS – Polytechnic School, Università degli Studi di Palermo, Viale delle Scienze, 90128, Palermo, Italy Email: [email protected] Abstract: In this paper, we take the perspective of app developers. Specifically, based on a sample of top paid apps from three major app stores, i.e., App Store, Google Play, and Blackberry World, we construct a hedonic price model to examine the role of relevant factors in price formation in the app market. Our results suggest a strong evidence of two-sided market effects. In fact, the lower price charged for apps operating as two-sided markets reflect the strategy of subsidising users, due to the positive cross-side externalities they exert on valuable third parties. Surprisingly, the effects of trialability, in-app purchase and mechanisms to build reputation are not significant in the context of successful apps. Finally, we find weak evidence that developers of top paid apps prefer price skimming to penetration price strategies. Keywords: mobile app market; online distribution; pricing; two-sided market. Reference to this paper should be made as follows: Roma, P. and Dominici, G. (2016) ‘Understanding the price drivers of successful apps in the mobile app market’, Int. J. Electronic Marketing and Retailing, Vol. 7, No. 2, pp.159–185. Biographical notes: Paolo Roma is an Assistant Professor of Marketing at the University of Palermo, Italy.
    [Show full text]
  • Pricing Strategy
    Pricing Strategy BAMA 550: Marketing Professor Kirstin Appelt Agenda 1. Assignment Debrief: Situation Analysis 2. Overview of Pricing 3. The 5 Cs of Pricing 4. Pricing Strategies and Tactics 5. Pricing Ethics 2 Team: Skills Matrix & Team Charter MARKETING Hand in today, if not already handed in PLAN Team: Brand Selection due Saturday at 11:59pm (but early bird gets PROJECT the worm) CHECK-IN Team: Jump Start (optional) not handed in, recommended for team use Team: Situation Analysis due Saturday, Sept. 16 at 11:59pm Team: Marketing Strategy Analysis due Saturday, October 7 at 11:59pm Individual: Team Evaluation due Sunday, October 8 at 11:59pm Price = Overall sacrifice consumer is willing to make to acquire product 4 What’s in a Price? 5 Price: the only mix element that generates revenue 6 The most flexible P A highly visible tool An art, not a science An indicator of quality Costs Considerations • 5 Cs of pricing Customers Competitors Company Channel objectives Value members 8 5Cs: Company Objectives What drives the company’s overall approach to pricing? Sales orientation: maximize volume Profit orientation: maximize profit or return Competitor orientation: relative to competitors Customer orientation: maximize value 9 5Cs: Customer Price elasticity = % change in quantity demanded % change in price 10 5Cs: Customer What factors influence elasticity of demand? • Substitution effect • Income effect – Necessity vs. non- • Proportion-of-budget essential product • (Prestige product) – Type of competition – Brand loyalty • Cross-price elasticity 11 5Cs: Competition Level of competition often shapes pricing: • Monopoly • Oligopoly • Monopolistic competition • Pure competition 12 Decommoditize through differentiation 13 5Cs: Channel Members Manufacturers, wholesalers, and retailers can have different pricing priorities… …and each layer can add cost.
    [Show full text]