Chapter 10 pricing
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Transcript of Chapter 10 pricing
PRICING DECISION1
chapter
10
Influences on pricing
The Generic influences on pricingObjectives Costs Marketing
mixInternal
stakeholders
Internal Influences
Pricing Decision
External Influences
Customers Competitors Share-holders Distributors Regulation
Objectives
Pricing decisions must take in to account the Organisation’s overall objectives.
It has two broad categories:Maximum return on investment, profit or margin
Maintaining or increasing market share or sales
Costs10
This is the most widely recognized influence onPrice.
Cost are typically recognize under two headingsoFixed cost- are incurred irrespective of levels ofSales of a product.
oVariable cost- refer to those costs which relate directly to the number of unit sold.
Marketing mix 1
If a product or service is to be positioned as a quality or prestige product then that image must be supported by a high price.
Internal stakeholders10
Pricing decisions involve different groups within the organization They will thus need to reflect the differing needs of groups. For example finance andAccounting may be concerned with price, only inRelation to cost and the organization’s ability to Certain specified financial targets.
External Factors 10
This includes:
Consumers
Competition
Intermediaries
Shareholders
Policy and Regulation
Consumers 10
Marketing managers must also think about consumer Perceptions of the value and the benefits they receive from the product.
What is important is not the cost but how highly the consumer value them.
Competition 10
If competitors prices are significantly lower, the Customers are more likely to buy from them.
Equally if competitors prices are significantly higher then the organization that is able to offer a lower price may gain additional sales.
Intermediaries 10
The intermediaries perform a range of services Including providing customers with information, helping them make choices and providing after sales.
The intermediaries has to be rewarded for providing these services.
Shareholders 10
Organization must give careful consideration to the needs and expectation of shareholders
Those providing capital will expect to receive an appropriate return and this must be factored into the pricing decision.
Policy and regulation
Chapter 1 Version 3e
1210
Specific policy and regulations may affect the pricing of certain product and services. These factors may constrain decisions made with respect to price.
Challenges Associated with Pricing Financial Services
Internal issuesCosts:-Financial service organizations may face difficulties in allocating costs across their productsbecause any service they provide to customer maybe combination of individual services.
Risks:- The issue of risk is probably far greater for financial services. When a bank provides a loan or issues a credit card, there is a risk that the consumer will not be able to make the payment.
External issues 10
Complexity and Transparency:- Many customers find financial service complex and difficult to understand. One particular area is the lack of transparency in pricing.Uncertainty:- Complication consumers face is that the value or benefit they get from particular financial service may not be clear or may be difficult to assess.
Variability:- Financial services are characterized by Variability.
Forms of pricing 10
Explicit or Over Pricing
Implicit or Covert Pricing
Spread Pricing
Explicit or Over Pricing 10
This approach makes the price paid for the service very clear.
Implicit or Covert Pricing
This is a system of pricing in which the actualprice to the consumer is unclear and the mayappear not pay it.
Spread pricing 10
This is a relatively specific approach to pricingmost commonly used in relation to managed funds.
Pricing strategies 10
The three general pricing strategies are :
Fixed Fee
Transactions Charges
Two-Part Tariffs
Fixed Fee
This types of pricing strategy presents the customer with a fixed fee for a given service in specific time period.
It may be used in combination with either implicit or explicit pricing.
Transactions Charges
This involves a specified charge for each transaction.
This type of pricing strategy only really works with explicit pricing.
Two-Part Tariffs
This involves a combination of fixed fee and transactions charges.
This comprises of charging a fixed fee and also a charge for the service used.