Strategic Marketing Basics

We should never forget that a price does not mean the same thing for the seller and for the buyer. For the seller, price is a component of revenue generation and profitability while for the buyer, it's the sacrifice to bare in order to get a promise of satisfaction...

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pricing is one of the most difficult decision to make: you always have the feeling that you're running in an unknown direction. Whatever survey and analysis you run, you never really know how customers will behave in the end.

 

Choosing on of the 2 classical methods (market based, profit based) is a way to approach the decision making process is one thing. But there are other ways to think about it.

 

One is to relate price setting to the product lifecycle. If you're the market first entrant, you will think about a "skim the cream strategy" i.e. setting prices as high as possible to cover your initial launching costs while targeting at non price sensitive opinion leaders. If, on the contrary, you enter the market later, during the growth stage, you may choose a "penetration pricing" tactic i.e. setting your price at a very agressive level in order to "buy market share", then leveling up after some   months...

 

Another way to think about it is to break the pricing rules of the game in the market. An example could be to choose a pricing based on usage time instead of buying the whole thing (leasing formulas). Or set the price of an element at nearly zero (or free) but make up the profit on another one (you get a         free basic but you pay the upgrade version...)

 

Dynamic pricing or (time-based pricing) refers to a system in which the price depends on the time when the service is provided or the commodity is delivered. The rational background of dynamic pricing is expected or observed change of the supply and demand balance during time. It's quite frequent now in sectors like transportation, tourism, utilities, professional sports, etc.

 

Actually there are a number of other alternatives given the market you fight in but they will all encompass the same elements at the end: sales volume & sales revenue expectations, profit margin considerations, competitive offers and value proposition positioning philosophy...