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Encyclopedia > Pricing
Marketing
Key concepts

Product / Price / Promotion
Placement / Service / Retail
Marketing research
Marketing strategy
Marketing management
Image File history File links Broom_icon. ... Wikibooks has more about this subject: Marketing Look up marketing in Wiktionary, the free dictionary. ... Scale model of a Wheaties cereal box at a pep rally Promotion is one of the four aspects of marketing. ... Wikibooks has more about this subject: Marketing Distribution is one of the four aspects of marketing. ... Wikibooks has more about this subject: Marketing In economics and marketing, a service is the non-material equivalent of a good. ... Drawing of a self-service store. ... Research is the search for and retrieval of existing, discovery or creation of new information or knowledge for a specific purpose. ... This article or section does not adequately cite its references or sources. ... Marketing management is the practical application of marketing techniques. ...

Promotional content

Advertising / Branding
Direct marketing / Personal Sales
Product placement / Public relations
Publicity / Sales promotion
Underwriting Commercialism redirects here. ... A brand is a name, logo, slogan, and/or design scheme associated with a product or service. ... Wikibooks has more about this subject: Marketing Direct marketing is a discipline within marketing that involves contacting individual customers (business-to-business or consumer) directly and obtaining their responses and transactions for the purpose of developing and prolonging mutually profitable customer relationships. ... Sales, or the activity of selling, forms an integral part of commercial activity. ... Wikibooks has more about this subject: Marketing Product placement advertisements are promotional ads placed by marketers using real commercial products and services in media, where the presence of a particular brand is the result of an economic exchange. ... Public relations (PR): Building sustainable relations with all publics in order to create a postive brand image. ... Wikibooks has more about this subject: Marketing Look up publicity in Wiktionary, the free dictionary. ... Wikibooks has more about this subject: Marketing Sales promotion is one of the four aspects of promotional mix. ... An underwriting spot is an announcement made on public broadcasting outlets, especially in the United States, in exchange for funding. ...

Promotional media

Printing / Publication / Broadcasting
Out-of-home / Internet marketing
Point of sale / Novelty items
Digital marketing / In-game
Word of mouth
For other articles which might have the same name, see Print (disambiguation). ... To publish is to make publicly known, and in reference to text and images, it can mean distributing paper copies to the public, or putting the content on a website. ... Broadcasting is the distribution of audio and/or video signals which transmit programs to an audience. ... Out-of-home advertising (also referred to as OOH) is essentially all type of advertising that reaches the consumer while he or she is outside the home. ... Wikibooks has more about this subject: Marketing Internet marketing is the use of the Internet to advertise and sell goods and services. ... This article or section does not cite its references or sources. ... It has been suggested that Advertising Specialties be merged into this article or section. ... Digital Marketing refers to the practice of marketing services, products and other items using digital tools and techniques that have appeared relatively recently since the rise of the Internet as a mainstream communications platform. ... In-game advertising (IGA) refers to the use of computer and video games as a medium in which to deliver advertising. ... Word-of-mouth marketing is a term used in the marketing and advertising industry to describe activities that companies undertake to generate personal recommendations as well as referrals for brand names, products and services. ...

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Wikibooks has more about this subject:
Marketing

Pricing is one of the four p's of the marketing mix. The other three aspects are product management, promotion, and place. It is also a key variable in microeconomic price allocation theory. Image File history File links Wikibooks-logo-en. ... Wikibooks has more about this subject: Marketing The marketing mix approach to marketing is a model of crafting and implementing marketing strategies. ... The marketing mix is generally accepted as the use and specification of the 4 Ps describing the strategic position of a product in the marketplace. ... This article or section does not adequately cite its references or sources. ... Scale model of a Wheaties cereal box at a pep rally Promotion is one of the four aspects of marketing. ... Look up Place in Wiktionary, the free dictionary. ... Microeconomics is the study of the economic behaviour of individual consumers, firms, and industries and the distribution of production and income among them. ...


Pricing is the manual or automatic process of applying prices to purchase and sales orders, based on factors such as: a fixed amount, quantity break, promotion or sales campaign, specific vendor quote, price prevailing on entry, shipment or invoice date, combination of multiple orders or lines, and many others. Automated systems require more setup and maintenance but may prevent pricing errors.

Contents

Questions involved in pricing

Pricing involves asking questions like:

  • How much to charge for a product or service? This question is a typical starting point for discussions about pricing, however, a better question for a vendor to ask is - How much do customers value the products, services, and other intangibles that the vendor provides.
  • What are the pricing objectives?
  • Do we use profit maximization pricing?
  • How to set the price?: (cost-plus pricing, demand based or value-based pricing, rate of return pricing, or competitor indexing)
  • Should there be a single price or multiple pricing?
  • Should prices change in various geographical areas, referred to as zone pricing?
  • Should there be quantity discounts?
  • What prices are competitors charging?
  • Do you use a price skimming strategy or a penetration pricing strategy?
  • What image do you want the price to convey?
  • Do you use psychological pricing?
  • How important are customer price sensitivity (e.g. "sticker shock") and elasticity issues?
  • Can real-time pricing be used?
  • Is price discrimination or yield management appropriate?
  • Are there legal restrictions on retail price maintenance, price collusion, or price discrimination?
  • Do price points already exist for the product category?
  • How flexible can we be in pricing? : The more competitive the industry, the less flexibility we have.
    • The price floor is determined by production factors like costs (often only variable costs are taken into account), economies of scale, marginal cost, and degree of operating leverage
    • The price ceiling is determined by demand factors like price elasticity and price points
  • Are there transfer pricing considerations?
  • What is the chance of getting involved in a price war?
  • How visible should the price be? - Should the price be neutral? (ie.: not an important differentiating factor), should it be highly visible? (to help promote a low priced economy product, or to reinforce the prestige image of a quality product), or should it be hidden? (so as to allow marketers to generate interest in the product unhindered by price considerations).
  • Are there joint product pricing considerations?
  • What are the non-price costs of purchasing the product? (eg.: travel time to the store, wait time in the store, dissagreeable elements associated with the product purchase - dentist -> pain, fishmarket -> smells)
  • What sort of payments should be accepted? (cash, cheque, credit card, barter) Pricing

Process of determining what a company will receive in exchange for its products. Wikibooks has more about this subject: Marketing In economics and marketing, a service is the non-material equivalent of a good. ... Pricing objectives or goals give direction to the whole pricing process. ... In economics, profit maximization is the process by which a firm determines the price and output level that returns the greatest profit. ... Cost-plus pricing is a pricing method commonly used by firms. ... Target rate of return pricing is a pricing method used almost exclusively by market leaders or monopolists. ... Competitor indexing is a price setting technique used by marketers. ... Geographical pricing, in marketing, is the practice of modifying a basic list price based on the geographical location of the buyer. ... Discounts and allowances are modifications to the basic price. ... Price Skimming Price skimming is a pricing strategy in which a marketer sets a relatively high price for a product or service at first, then lowers the price over time. ... Penetration pricing is the pricing technique of setting a relatively low initial entry price, a price that is often lower than the eventual market price. ... Retail prices are often expressed as odd prices: a little less than a round number, e. ... Sticker shock is the feeling of surprise or shock experienced by consumers upon finding unexpectedly high prices on the price tags (stickers) of products they are considering purchasing. ... In economics and business studies, the price elasticity of demand (PED) is an elasticity that measures the nature and degree of the relationship between changes in quantity demanded of a good and changes in its price. ... Most firms use a fixed price policy. ... Price discrimination exists when sales of identical goods or services are transacted at different prices from the same provider. ... Price points are prices for which demand is relatively high. ... This article or section does not cite any references or sources. ... Transfer pricing refers to the pricing of goods and services within a multi-divisional organization, particularly in regard to cross-border transactions. ... Price war is a term used in business to indicate a state of intense competitive rivalry accompanied by a multi-lateral series of price reductions. ... Pricing for joint products is a little more complex that pricing for a single product. ... Barter is a type of trade in which goods or services are exchanged for other goods and/or services; no money is involved in the transaction. ...


What a price should do

A well chosen price should do three things :

  • achieve the financial goals of the firm (eg.: profitability)
  • fit the realities of the marketplace (will customers buy at that price?)
  • support a product's positioning and be consistent with the other variables in the marketing mix
    • price is influenced by the type of distribution channel used, the type of promotions used, and the quality of the product
      • price will usually need to be relatively high if manufacturing is expensive, distribution is exclusive, and the product is supported by extensive advertising and promotional campaigns
      • a low price can be a viable substitute for product quality, effective promotions, or an energetic selling effort by distributors

From the marketers 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 shifts most of the consumer surplus to the producer. A products position is how potential buyers see the product. ... The marketing mix is generally accepted as the use and specification of the 4 Ps describing the strategic position of a product in the marketplace. ... Commercialism redirects here. ... Scale model of a Wheaties cereal box at a pep rally Promotion is one of the four aspects of marketing. ... The term surplus is used in economics for several related quantities. ...


Definitions of Pricing

The effective price is the price the company receives after accounting for discounts, promotions, and other incentives.


Price lining is the use of a limited number of prices for all your product offerings. This is a tradition started in the old five and dime stores in which everything cost either 5 or 10 cents. Its underlying rationale is that these amounts are seen as suitable price points for a whole range of products by prospective customers. It has the advantage of ease of administering, but the disadvantage of inflexibility, particularly in times of inflation or unstable prices. Five and dime was a common nickname in the United States for five-and-ten-cent stores (also called 5 and 10s), popular in the early to mid-20th century. ... Price points are prices for which demand is relatively high. ...


A loss leader is a product that has a price set below the operating margin. This results in a loss to the enterprise on that particular item, but this is done in the hope that it will draw customers into the store and that some of those customers will buy other, higher margin items. In marketing, a loss leader is an item that is sold below cost in an effort to stimulate other profitable sales. ...


Promotional pricing refers to an instance where pricing is the key element of the marketing mix. The marketing mix is generally accepted as the use and specification of the 4 Ps describing the strategic position of a product in the marketplace. ...


The price/quality relationship refers to the perception by most consumers that a relatively high price is a sign of good quality. The belief in this relationship is most important with complex products that are hard to test, and experiential products that cannot be tested until used (such as most services). The greater the uncertainty surrounding a product, the more consumers depend on the price/quality hypothesis and the more of a premium they are prepared to pay. The classic example of this is the pricing of the snack cake Twinkies, which were perceived as low quality when the price was lowered. Note, however, that excessive reliance on the price/quantity relationship by consumers may lead to the raising of prices on all products and services, even those of low quality, which in turn causes the price/quality relationship to no longer apply. A Twinkie is a Golden Sponge Cake with Creamy Filling created by Hostess, and baked by Continental Baking Co, which is owned by Kansas City-based Interstate Bakeries Corporation. ...


Premium pricing (also called prestige pricing) is the strategy of pricing at, or near, the high end of the possible price range. People will buy a premium priced product because:

  1. They believe the high price is an indication of good quality;
  2. They believe it to be a sign of self worth - "They are worth it" - It authenticates their success and status - It is a signal to others that they are a member of an exclusive group; and
  3. They require flawless performance in this application - The cost of product malfunction is too high to buy anything but the best - example : heart pacemaker

The term Goldilocks pricing is commonly used to describe the practice of providing a "gold-plated" version of a product at a premium price in order to make the next-lower priced option look more reasonably priced; for example, encouraging customers to see business-class airline seats as good value for money by offering an even higher priced first-class option.[citation needed] Similarly, third-class railway carriages in Victorian England are said to have been built without windows, not so much to punish third-class customers (for which there was no economic incentive), as to motivate those who could afford second-class seats to pay for them instead of taking the cheaper option.[citation needed] This is also known as a potential result of price discrimination. Price discrimination exists when sales of identical goods or services are transacted at different prices from the same provider. ...


The name derives from the Goldilocks story, in which Goldilocks chose neither the hottest nor the coldest porridge, but instead the one that was "just right". More technically, this form of pricing exploits the general cognitive bias of aversion to extremes. Someones been eating my porridge, and theyve eaten it all up! Goldilocks and the Three Bears is a popular childrens fairy tale. ... This article or section does not cite its references or sources. ...


Demand-based pricing is any pricing method that uses consumer demand - based on perceived value - as the central element. These include : price skimming, price discrimination and yield management, price points, psychological pricing, bundle pricing, penetration pricing, price lining, value-based pricing, geo and premium pricing. Price Skimming Price skimming is a pricing strategy in which a marketer sets a relatively high price for a product or service at first, then lowers the price over time. ... Price discrimination exists when sales of identical goods or services are transacted at different prices from the same provider. ... Price points are prices for which demand is relatively high. ... Retail prices are often expressed as odd prices: a little less than a round number, e. ... Product bundling is a marketing strategy that involves offering several products for sale as one combined product. ... Penetration pricing is the pricing technique of setting a relatively low initial entry price, a price that is often lower than the eventual market price. ... The goal of value-based pricing is to align price with value delivered. ... Geo (Marketing) is a discipline within Marketing-Analysis which uses geographic information or Geolocation in the process of planning and implementation of marketing activities. ...


See also


  Results from FactBites:
 
Price - Wikipedia, the free encyclopedia (1048 words)
The concept of price is central to microeconomics where it is one of the most important variables in resource allocation theory (also called price theory).
Price is also central to marketing where it is one of the four variables in the marketing mix that business people use to develop a marketing plan.
In Marxian economics, the increasing use of prices as a convenient way to measure the economic or trading value of labor-products is explained historically and anthropologically, in terms of the development of the use of money as universal equivalent in economic exchange.
Pricing - Wikipedia, the free encyclopedia (1040 words)
Pricing is the manual or automatic process of applying prices to purchase and sales orders, based on factors such as: a fixed amount, quantity break, promotion or sales campaign, specific vendor quote, price prevailing on entry, shipment or invoice date, combination of multiple orders or lines, and many others.
In economic terms, it is a price that shifts most of the consumer surplus to the producer.
The classic example of this is the pricing of the snack cake Twinkies, which were perceived as low quality when the price was lowered.
  More results at FactBites »

 
 

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