Posted by Silvie Koang in Effective Pricing Strategy is to Control Financial Success on Saturday, September 1, 2012
A key goal of an effective pricing strategy is to manage revenues in ways that support the firm's profitability objectives. To do this a firm has to have a good understanding of its cost. The value created for customers and competitors pricing, this is a real challenge for services firm. Competitor pricing cannot be compared dollar for dollar with a firms pricing. As services are often location and time specific,
Generally Marketing includes:
• Determining what the customer wants and needs.
• Providing products or services that meet those wants and needs.
• Informing the customer about the availability of products and services and the benefits of using them.
• Selling products and services at prices that customer considers being fair.
This often used cost plus pricing, price schedules were often tightly constrained by government regulatory agencies and some projection are today. however most service businesses enjoy significant freedom in setting price and have a good understanding of value- base and competitive pricing, these developments have led creative pricing schedules and sophisticated yield management system ,
The Four P's of Marketing—Product, Place, Price, and Promotion provide you better understand that what they are likely to purchase and how much they are willing to spend for specific items.
Price: The value placed on the product or service being offered. The pricing structure is often determined by the unit cost of the product with a specific percentage mark up. The markup can range from 20-100% of unit cost.
Promotion: Influencing the acceptability and sale of the products and services to the customer. This could be done in several ways ranging from product line, pricing structure, and advertising strategies.
Product: The goods or services that are provided to the customer.
Place: How, where, and when the product or service is provided. This would include the location and an hour of operation is the main factor of potential marketing.
Pricing is typically more complex in services than in manufacturing because there is no ownership of services. it is usually more difficult for managers to determine the financial cost of creating a process or performance for a customer than to identify the costs associated with creating and distributing a physical good, the inability to inventory services places a premium on bringing demand and supply into balance, a task in which pricing has a key role to play, the importance of the time factor in service delivery means that speed of delivery and avoidance of waiting time often increase value , with the increase in value , customers are prepared to pay a higher price for the service.
Price sensitivity measurement methods:
"Asks permission" to charge higher prices for added value without loss of sales
Seeks confirmation that discount pricing will increase, not depress, revenues (i.e., is not a Gratuitous concession)
Seeks reassurance that the discount is an adequate concession, in light of product "deficits"
Conclusion: What does a marketing perspective bring to pricing? Effective pricing strategies seek to enhance for even maximize the level of revenues. Pricing research is a compass, not an automatic navigational system. Expect it to provide worthwhile guidance but not irrefutable answers, and be prepared to select different tools from your pricing kit for different marketing problems. One size, one tool definitely does not fit all. Often by discriminating between different market segments based on their value perceptions and ability to pay and between different time periods. Based on variations in demand levels over time
This entry was posted on Saturday, September 1, 2012 at 1:22 PM and is filed under Effective Pricing Strategy is to Control Financial Success. You can follow any responses to this entry through the RSS 2.0. You can leave a response.