Submitted by: Submitted by akira043
Views: 232
Words: 255
Pages: 2
Category: Business and Industry
Date Submitted: 10/31/2011 09:29 PM
Considering a 7% price decrease on its most popular product. What should they consider?
Hoping for a price sensitive market
Elasticity of customers to price changes= matched with profitability of pricing decisions
Contribution margin
Profitablity
Current margin
Variable cost
Fixed cost
Pricing’s Match to strategy is important
Entery to other product
Cross selling- looking at the profitability of both products
Relationship marketing----for acquisition( inc market share) or retention purposes
Product life cycle
Customer lifetime pricing
Is this a segmentation play….does it tap new segments? Does this undermine existing segmentation
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Will it cannibalise higher price products?
Customer-
1. Elasticity
2. Relationship with the customer
3. Segmentation
4. Idea of value- how much do you have and what is happening to the value of your product- its going down when new products in the market, competitors can match what you are differentiating in, competitor prices
-------------------------------------------------------------------- value
Customer
Elasticity/Demand
Segmentation-does it vary across groups
Relationships
Buyer behavior= perception of pricing – emotion, fairness, motivation
------------------------------------------------------------------cost
Price is some number in between that shares value with the company. It lives between the bounds of consumer driven rather than contribution margin( profits)
Price cut affects perception of quality (brand degradation),norms and expectations( affects in the following years), becomes a frame of reference(as compared to your other products as this new product may not look as attractive if price of this product goes down)
Balnce points
Customer
Company( what is it worth to us)
Competition
Collaboration( shared interest to help me or harm me)