MKT 402 SU Pricing Strategies Discussion
Cost-Plus Pricing:
Product that benefits: Customized Jewelry
Rationale: Cost-plus pricing works well for products like customized jewelry because the production costs can be precisely calculated, including materials, labor, and overhead. Customers often expect transparency in pricing for unique, personalized items, and this method allows jewelers to ensure they cover their costs and make a reasonable profit. It also provides a clear starting point for negotiations if customers request additional features or changes.
Product that does not benefit: Streaming Services
Rationale: Streaming services, such as Netflix or Spotify, would not benefit from cost-plus pricing. These services have significant fixed costs associated with content licensing, infrastructure, and development, but their pricing is typically based on customer demand and competitive positioning rather than a strict cost-plus calculation. Customers are willing to pay a subscription fee for access to a vast library of content, and this pricing strategy allows companies to maximize their revenue without directly linking it to production costs.
Customer-Driven Pricing:
Product that benefits: Luxury Watches
Rationale: Luxury watches benefit from customer-driven pricing because customers in this market segment often base their purchasing decisions on perceived value, brand prestige, and exclusivity. Companies like Rolex or Patek Philippe set their prices based on what their target customers are willing to pay for the status and craftsmanship associated with their products. This strategy allows them to capture a premium price for their watches.
Product that does not benefit: Generic Pain Relievers
Rationale: Generic pain relievers, such as ibuprofen or acetaminophen, would not benefit from customer-driven pricing. These products are commoditized, and customers primarily make purchasing decisions based on price and familiarity with the active ingredients. Therefore, pricing is usually highly competitive and driven by market forces, making it challenging to set prices based on what individual customers are willing to pay.
Share-Driven Pricing:
Product that benefits: Fast Food Burgers
Rationale: Fast food burgers benefit from share-driven pricing because they are part of a highly competitive market where prices are influenced by what competitors are charging. Fast-food chains frequently adjust their prices to match or undercut rivals, aiming to capture a larger market share. This strategy allows them to remain competitive in an industry where customers often compare prices and quality.
Product that does not benefit: Bespoke Tailored Suits
Rationale: Bespoke tailored suits would not benefit from share-driven pricing. These high-end, custom-made products are not directly comparable to mass-produced clothing items found in typical retail stores. Customers seeking bespoke suits are usually looking for unique craftsmanship, personalized fitting, and high-quality materials, rather than basing their decisions solely on price. Pricing for such products is determined by the artisan’s skill, materials used, and the exclusivity of the service, rather than market competition.
QUESTION
Description
Identify one product that would benefit from each of these three pricing strategies, and one product that would not benefit from each pricing strategy (cost-plus, customer-driven, and share-driven). State your rationale for each selection.
AND REspond TO THIS POST:
Robinson
RE: Week 1 Discussion 1
Hello Professor and Classmates,
I am going to be the first to take a stab at this for week 1 discussion.
Cost-plus pricing: Is a strategy for which retailers, construction companies, and some repair shops greatly benefit from as an assumption of making a profit. The cost-plus strategy is unquestionably the most uncomplicated and generally straight forward method for deciding cost. Notwithstanding, it may not be the most exact. It is maybe best taken a gander at as a beginning stage, from which the last cost can be characterized. Adversaries of the technique would contend that not all expenses are fixed. An all the more glaring drawback, however, is that this methodology may not mirror the genuine estimation of the item.
Customer driven pricing: This strategy of pricing is where the seller makes the decision based on what the consumer justify what they will pay. B2B (Business to Business) sales for which allows marketing and sales to collect information on its customer value. A product that benefits from Customer-driven pricing would be Consulting firms. Expecting the last item or experience is adequate; the client feels in complete control of the buy and, in any event to some extent, is answerable for their own fulfillment. Airlines are less likely to benefit from Customer-driven pricing, due to the outrageous fees that cannot be negotiated or drive the cost no matter what.
Share driven pricing: This strategy is strictly dictated by competitive conditions. Meaning a company way to stay competitive in their industry over their opposition, this empowers the company to settle on moderately simple valuing choices. Small items/sales benefit the most from this strategy because this strategy allows them to compete on a lower scale. For example, if a small business such as GovSmart, a value-added reseller (VAR), increases their cost on a software license by $32, then MA Federal the same VAR will also increase their cost. High end or products will not benefit from this strategy due to the fact their cost/pricing has already defined as a higher price or cost.
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