RSM250H1 Chapter Notes - Chapter 9: Hershey Bar, Handsfree, Predatory Pricing
4 Mar 2018
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Fundamentals behind "pricing right: understanding the value-pricing approach, assessing the product"s value to customers, assessing price sensitivity, price customization. Value-pricing approach: driven by the factors below. Objective value or true economic value (tev): measure of the benefits that the product delivers to the consumer relative to other products, regardless of whether the consumer recognizes those benefits. In order to stay in business and make a positive return, the firm must charge a price that covers its cost of production. Week 7: results are often an overly optimistic picture of a product"s potential. Assessing price sensitivity: sensitivity varies across customers, time and products. Magnitude of price: price sensitivity tends to be far greater in high-cost than in low-cost product categories. Price sensitivity is likely to increase as: the absolute dollar cost of the product increases, aggregate cost of ongoing usage increases, cost of that product increases as a percentage of the total cost.
