ADMN 2100H Lecture Notes - Lecture 8: Psychological Pricing, Price Ceiling, Price Floor
20 Jun 2018
School
Department
Course
Professor
ADMN2100H: Introduction to Marketing
Thursd a y, March 8th, 2018
Lecture Week 8
Capture Value
-Price floor unprofitable below this price
-Price ceiling no dema n d above this price
oproduct costs
oother considera tions: co mpe tition, nature of market, compa n y strengt hs
ocusto me r/c o ns u me r perce ptions of value
Cost- Base d Pricing vs. Value- Based Pricing
Cost-based pricing
Design a good product determine product costs set price based on cost convince buyers of product's value
Value-based pricing
Assess customer needs and value perceptions set target price to match customer perceived value determine
costs that can be incurred design product to deliver desired value at target price
Cost-Based Pricing
-develop m e n t costs (even if you are providing a service, time is a develop m e n t cost)
-fixed costs (includ e rent, payroll)
-variable costs (chang e s with the numb e r of units that you sell (plastic that when into the
product))
at 0, the total costs are equal to the fixed costs
as you go up, every unit you sell add s to the total cost
Customer/Consumer Value-Based Pricing
-custo me r/c o ns u me r deter min e s pricing
-good value pricing
ojust the right combin ation of quality, service, featur e ben efit and price
-value- add e d pricing
orath er tha n cutting prices to mee t comp e tition, you add feature s, ben efits and
service s to differentiat e and justify a higher price
oif you are the new guy in town, you gen e r ally nee d to meet the comp e tition
ostart with the price and you ask how you can differentiate yourself (adding feature s ,
benefits and services)
New- Product Pricing
-price skimming
ohigh-priced products
oeconomical at lower values
ohigh barrier to entry – hard to copy
omarket is not initially highly price sensitive
-market penetration
olow price to attract business
oeconomies of scale allow for even lower prices
omarket must be highly price-sensitive
Product Mix Pricing
-line pricing
oset price across an entire product line OR
otiered pricing according to features/benefits included
find more resources at oneclass.com
find more resources at oneclass.com
Document Summary
Admn210 0h: introdu c ti on to marketing. Price floor unprofit a bl e below this price. Cost- base d pricing vs. value- base d pricing. Design a good product determine product costs set price based on cost convince buyers of product"s value. Assess customer needs and value perceptions set target price to match customer perceived value determine costs that can be incurred design product to deliver desired value at target price. New- product pricing price skimming: high-priced products, economical at lower values, high barrier to entry hard to copy, market is not initially highly price sensitive. Market penetration: low price to attract business, economies of scale allow for even lower prices, market must be highly price-sensitive. An then there is the government collusion regul a tion contr a c t s. 100% (higher price lower price) / lower price.
