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Title: Pricing
Description: - Institution: University College London - Class: Introduction to Marketing (Intermediate Level in the UCL School of Management) - Lecturer: Jane Burns-Nurse Lecture notes on the different concepts that involve pricing in marketing and business generally. It places pricing in the marketing context using the marketing mix as well as the mathematics behind the pricing strategies so often mentioned. It is completed with diagrams to illustrate the notes.
Description: - Institution: University College London - Class: Introduction to Marketing (Intermediate Level in the UCL School of Management) - Lecturer: Jane Burns-Nurse Lecture notes on the different concepts that involve pricing in marketing and business generally. It places pricing in the marketing context using the marketing mix as well as the mathematics behind the pricing strategies so often mentioned. It is completed with diagrams to illustrate the notes.
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Eloi Simon
University College London
Lecturer: Jane Burns
PRICING
Value = Benefits - Costs
(perceived) Value = (perceived) Benefits - (perceived) Costs
Quality: do we place more value on products of higher quality? do we pay more for products
made by household name, such as Cadbury's or BMW?
Operational: if we were in a B2B market, will this new piece of machinery increase productivity
and efficiency?
Financial: will this same piece of machinery be an investment and pay for itself over time?
Personal: what will I gain from this product on a personal level? will it make me feel good? will it
make me look good?
Functional: what benefits do we get from the design of the product and its ability to fulfil its
desired function?
Profit = Total Revenue - Total Costs
(Total Revenue = Number of Items Sold x Price of Each Item)
Customers and consumers: how will the end user feel about the price of the product? what
are the consumer's pricing thresholds? Read More
Demand and price elasticity: what effect will a change in price have on the target market
demand for a product? Read More
Competitors: what is the effect on price with the current level and intensity of competition?
Channels of distribution: what are desired profit margins of other members of the distribution
chain?
Legal and regulatory framework: how might government restrictions affect pricing of a
product? Read More
LECTURE NOTES
One of the P’s - Price
Factors that influence pricing
Price → The value that is placed on something
Value
- Value is an abstract construct so its definition and meaning is different according
to person
- When we don’t have something and it is scarce, we tend to value it more
- When you pay for something, you value it
- If free, you value it very differently
You have decided to open a shop selling a range of vintage clothing
- How will you decide to price your stock? (price setting)
Factors to consider when pricing
- Find out / think about original prices
- Condition of the product
- Release date (Age)
- Target market
- Pricing strategies
- Material
- Brand / Designer
- Location (Bricks / Clicks)
- Rarity
- “In-fashion”-ness (Trends)
- Regulations
- Former owner
- Costs
- Fixed costs (rent / )
- Variable costs (electricity / plastic bags / advertising)
- Staff costs
- Costs associated with equipment
Price assessment
How do you choose the price you’re ready to pay
- Reference prices
- Brand image
-
Budget
Quality (abstract construct)
Functional
Operational
Personal
Financial (what’s a reasonable price to pay)
Buying decision based on…
- Habit
- Advertising
Types of markets
- Consumer markets (B2C)
- B2B Markets
- Non-profit markets
- How do universities choose fees
- Retail and wholesale markets
- Service markets
Price is the only elements in the marketing mix that generates revenue
Profit = Total Revenue - Total Cost
External influences on pricing decisions
- Customers
- Demand / elasticity
- Legal / regulatory (for example alcohol and tobacco)
- Taxation element (VAT, etc)
- Channels of distribution
- Competitors
- How are competitors going to act, price and position themselves
Social impact → Just because you can do something doesn’t mean it’s the right thing to do
___________________________________________
The Classic Demand Curve
The Boomerang Demand Curve
Price Elasticity
→ The responsiveness of demand to changes in prices
...
Competition
Monopoly → one assumes that you can charge what you like (usually that is regulated by gov’t)
Oligopoly →
Monopolistic competition →
Perfect competition →
Internal influences on pricing decisions
-
-
Costs
- Fixed Costs
- Rent of location
- Staff
Organisational objectives
Marketing objectives
___________________________________________
Determining a Price Range
Pricing objective → Demand Assessment → Pricing policies and strategies → Setting the price
range → Pricing tactics and adjustments
Market estimation can sometimes be wrong
→ Predicting market for computer sales was 5 in 1948
→ Estimated to sell 10,000 Sony walkmans when it was released, sold 3 million in the first 6
months
Pricing objectives must be…
- Clearly defined
- Detailed
- Time-specific
- Consistent
Conflicting Price Objectives
Sales and Marketing objectives
New Product Pricing Strategies
Skimming
- Setting a high price to attract the least price-sensitive market segments
Penetration
- Using an aggressively low price to gain volume (in the market)
Product Mix Pricing Strategies
Price changes
Organisations have to think carefully about price changes (if increased could decrease sales)
Implementing price cuts
- Capacity utilisation
- Market Dominance
- Market defence
Implementing price increases
- Cost pressures
- Curb demand
Cost-based methods
- Mark-up
-
Cost-plus
Experience curve
Low-cost airlines use a demand-based pricing model
Competition-Based pricing
- Structure of market
- Perceived value of product in the market
Pricing Tactics
- Price structures give guidelines to sales representatives to help in negotiating a final
price with the customer
...
A special adjustment
is a variation on a price structure
Title: Pricing
Description: - Institution: University College London - Class: Introduction to Marketing (Intermediate Level in the UCL School of Management) - Lecturer: Jane Burns-Nurse Lecture notes on the different concepts that involve pricing in marketing and business generally. It places pricing in the marketing context using the marketing mix as well as the mathematics behind the pricing strategies so often mentioned. It is completed with diagrams to illustrate the notes.
Description: - Institution: University College London - Class: Introduction to Marketing (Intermediate Level in the UCL School of Management) - Lecturer: Jane Burns-Nurse Lecture notes on the different concepts that involve pricing in marketing and business generally. It places pricing in the marketing context using the marketing mix as well as the mathematics behind the pricing strategies so often mentioned. It is completed with diagrams to illustrate the notes.