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Pricing

Pricing Strategies. Pricing affects the whole P

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Pricing

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    1. Pricing Product Management MK 7790

    2. Pricing Strategies Pricing affects the whole P&L and overall profitability. Pricing affects forecasting Elasticity = change in volume/ change in price. Pricing affects positioning (e.g. IZOD example - discount) Objectives Penetration skimming ROI Stability

    3. Pricing Basics Cost and profit requirements. (cost plus; target ROI, learning curve) Benefits delivered (attributes x utility, options pricing). Competitive and Channel threats (going rate, price value gap; margin enhancement). Differential pricing (Optimization, segmentation, price sensitivity, secondary markets). Periodic/Seasonal discounting. Product line pricing: relative price points and promotion trade up

    4. Pricing Basics Price bands Price bands (Generic vs Haagen Dazs ice cream) Why - different importance placed on price Price not always easily visible fewer competitors Perceived Value Perceived value > Price> Variable cost Leaving money on table Price>PV>VC poor value

    5. Pricing Basics Value Value in use - price to limit of incremental benefit Simulate buying experience Conjoint and assessing brand equity Price thresholds Reservation price - Highest Lower bound Estimate acceptable price Reference price standard comparison Experience curve and cost

    6. Pricing Basics Bundling Line Pricing Complementary pricing -razors and blades Everyday low price Differential pricing Secondary markets Discounting

    7. What Affects Price Elasticity Unique Value - more unique, less price sensitive (Harvard MBA) Substitute Awareness - if less aware, less price sensitive (Non-commodity consulting) Difficult Comparison - If hard, less price sensitive (brain surgery) Total Expenditure - if price low relative to income, less price sensitive (rich people) End Benefit - If object price is low portion of total cost, less price sensitive (i.e.., mouse) Shared Cost - If cost is shared, less price sensitive (government) Sunk Investment - If already purchased related product, less price sensitive - (Razor blades; virus protector) Price Quality - If product has more perceived quality, prestige, or exclusiveness, less price sensitive Inventory - If cannot store the product, less price sensitive.

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