Price

Price overview (VIDEO)

The Price capture the value of something for the firm. The development of a pricing strategy
is a complex decision and often entails considering:

• Cost of production
• What costumers are willing to pay
• Price of competing products

Price portion of the marketing mix key concepts

• Break – even analysis:
• Price elasticity:
• Reference prices:

Pricing strategy
A firms basic approach to how to price its products.

• Cost-plus pricing: The price of a product is based upon the cost of manufacturing
or acquiring a product plus a commonly accepted markup percentage.
• Competitive-based pricing: The price of a product is based upon closely matching
the prices of relevant competitors.
• Value-based pricing: Focuses on the added value that a product delivers to its
customers. (the value added for location, event, promotion or something else).

What is changing?
The fixed, firm-centered approach to pricing is breaking down due to the rise of digital tools.
Pay what you want – Part 1 (VIDEO)

“IF the price is to high a firm will lose potential sales, but if its to
low it will lose some potential revenue”

“The key is to find the price that is just right”

“Price varies according to the value it provides to various potential

customers”

Price segmentation
Create different prices for different people based on their age, acquisition power, etc.

Pay what you want definition

A pricing strategy that lets customers decide how much they want to pay for a particular
product.
Although a firm may suggest a price its customers are free to pay less or more than this price,
including paying even nothing.

Key issues
Like customers are looking as much as they can as little as they have to pay the PWYW pricing
strategy may not work, but recent studies show that this will be wrong. Because the buy
behavior or a PWYW on a restaurant the 99% of people pay for their food.

“Firms often gets a lot of attention when they apply a PWYW strategy”

• This pricing strategy is not sustainable at a long term, you just need to offer this
kind of pricing on a limited duration, selection and a set of costumers.
Pay what you want – part 2 (Video)
Practical recommendations
• Set a reference price: Display a product whit their price that could b equal to the product
of PWYW pricing strategy. Sins most people want to think of themselves as fair and
honest, the setting of a reference price should decrease their temptation to pay little or
nothing for a product.
• Focus on marginal cost: This pricing strategy works better for products that have a low
marginal cost.
• Try a limited rollout: Limit the product offerings or the duration of a PWYW pricing
strategy. This reduce the risk of a PWYA strategy while still benefitting from the attention
it receives.
• Use charity appeals: A PWYA strategy will be more likely to succeed if the seller
announces that some or all the revenues will be donated to charity. This send a signal that
the seller is generous at nature, and will encourage customers to act the same.