TOMNUB, LIZZETTE N.

MM 3-1

1. How price is determined using demand-based pricing strategy?

Demand-based pricing refers to any pricing strategy that takes into account
swings in consumer demand. Price are determined and are being adjust to reflect
the resulting shifts in perceived value. It also refers to a comprehensive pricing
strategy that might encompass a variety of tactics. What they all have in common,
and what distinguishes this strategy from others, is that the product's price is
determined by consumer demand rather than inward-looking factors like cost of
manufacturing. Specifically, the seller seeks to determine the greatest acceptable
price for its items that a specific segment of its customers will pay at a given time.
2. What do you think is advantages and disadvantages of demand-based
pricing?
The advantages with a demand-based pricing strategy like price skimming is that
you can enjoy high profits for a limited time because you'll be charging more to
early adopters, and your high launch prices can even help your brand build buzz
and media interest. Another advantage of geo-based pricing is that it allows you
to capitalize on the fact that consumers in some areas will likely pay more for the
same item than people in other areas. As for its disadvantage is that If your team
needs to constantly evaluate market data across several geographical areas to
determine where to set your items' prices in each area, demand-based pricing,
such as Geo-pricing, can add a lot of extra work to manage. Another downside is
that determining where to set the product's relatively high start price, when to
begin gradually dropping the price to broaden the product's market, and at what
time intervals and price increments these drops should occur would take a lot of
work and research.