X+4.4+Price

= 4.4 Price =



' __ **Price** __ ' is part of the ' ** Marketing Mix ** ' which, together with ' ** Research ** ' make up the process of ' ** Marketing ** '. Firms may sell a very similar product, at similar places, using similar promotion - but get their customers to choose them over their rival because their Price is different.

KEY WORDS:

So how do set a price? You can find a 'random number generator' online, press 'run' and go with that - but as a strategy this has its flaws!!!

So how do you set a price - what factors do you consider.. We discussed this as a class and it took us about a minute to come up with these 3 vital considerations //The third is usually (not always) the mosty important, and we got there last - but (a) we did get there and (b) the first 2 are important as well.//
 * 1) what are your competitors charging?
 * 2) who are your customers and what can they afford?
 * 3) what are your production costs?

In business terminology we group all pricing methods into 'strategies' and define these strategies according to... because often you will consider a variety of factors - but what was the most important, the first factor, the starting point? ......and according to the answer we get 3 Strategies //(in order with the considerations above//)
 * 'What was the MOST IMPORTANT factor you thought about when setting your Price?'

1. **Competition-based**
 * this is where you think //'OK, my main rival is selling their product at $50 and i need to be a little cheaper'//. You might then go look at your costs and decide how much cheaper - but your starting point was 'to be lower than your competition'
 * There is a common MISTAKE here. This strategy does NOT necessarily mean going lower than the competition - it could mean this but not necessarily so. It means //you consider your rival when setting your price//. You may end up going a little higher to appear better quality than them.

2. **Market-based** 3. **Cost-based**
 * this is where you think '//OK, my product is aimed at the high-income group so I need to set a price that will attract them'//. You might then go look at your rivals and see the range in which you will set your price - but your starting point was 'who is my client'
 * this is where you think //'OK, I have just looked at my costs and they are $45, i must sell it for at least $45.01// '. You might then go look at who your customer and what is required to win them over, and set a price of $50 or $500 - but your starting point was 'I must cover my costs' - and you'll see its not always simple to work out the costs of an individual unit.

Remember that for most firms setting a price will involve factoring in a variety of considerations - but we classify the strategies according to what was their main\first consideration.

You as a customer cannot look at a price of a Product and //know// what strategy they use. You can take an educated guess, but to //know// you need to speak to the Decision Maker i.e. the person who set the price.

Within these 3 categories you have several examples - leading to a total of __** 10 **__ different pricing startegies.

The table below keeps things general.. + gives you a clear target for reducing / controlling costs ie if your unit price will be $10 you know that you have to control your average cost to a absolute maximum of $9.99 || + increased chances of selling all your production and avoiding excess unsold stock + also 'gives you a clear target for reducing / controlling costs .... ' ||
 * || ==**Advantages**== ||
 * Competition based || + eliminates any possible differentiation strategy that //your rival// may take
 * Market based || + you know your price is affordable to your customers
 * Cost based || + ensures you achieve the basic business objective of 'survival'

//* of course how much you add on to your costs when you set a price depends on various things eg what value you have added & your objectives a s business// ||

//.. * all of these advantages above are based on the assumption (which obviously is not always correct) that we can sell all the products we put a price on// .. * the advantages of one are often the disadvantages of the others eg If you adopt market based you may find your rivals undercut you with a special offer and take away your customers. etc

OK, so going through the Strategies one at a time

__**Competition based**__ : //not surprisingly we have 3 : One for when you set the price the same as the competition, one for when you set it lower, and one for when you set it higher.//
 * **Going Rate** (aka Me-too). This is when you set it at a similar price.
 * **Predatory** (aka Destroyer)
 * **Price Leaders**

__**Market based**__ :
 * Penetration
 * **Promotional**
 * **Loss leader**
 * **Skimming** (aka Destroyer)
 * **Psychological**
 * Discrimination

__**Cost based**__ : //.//
 * **Cost plus**
 * **Marginal**
 * **Full Cost**
 * **Absorption**

Who holds the power?

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