Proc 5830 Mid Term Notes

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Chater 1

A price increase to cover fixed cost further reduces sales and raises unit cost even higher resulting is often that price increases reduce profits.

The job of sales /marketing is to raise customer’s willingness to pay to a level better reflects the products true value.

Even when customers understand the value of your offerings, they have powerful financial incentive to negotiate lower prices.

Strategic Pricing, entails the coordination of interrelated marketing, competitive, and financial decisions to set prices profitability. It should be proactive, value-based and profit driven.

Strategy means the coordination of otherwise independent activities to achieve a common objective. Strategic pricing, that objective is profitability.

A key objective of pricing is to capture the value created for customers, and then specific prices must be set by those best able to anticipate the value.

Pricing can only capture the value of an offering when the value has been communicated.

Pricing is a critical issue for management because it represents the key to unlocking profitable growth opportunities.

Pricing strategy (strategic pricing) is about proactively managing customer behavior/expectations rather than simply adapting to it.

Educate customers on the value by unique features of the product in order to justify the higher price.

Pricing should be guided by the three fundamental principles: Value based Proactive and profit driven.

Value communication area key element of value based pricing

Strategic pricing involves communicating information, forcing tradeoffs and establishing consistent policies that change how the market reacts to the company’s pricing.

Even in the most competitive markets it is possible to improve profits by proactively aligning pricing with customer perceived value in your offer.

Profit driven, increase profitability

Since profit is driven by percent margin and volume, the discipline of strategic pricing requires making...