Professional Documents
Culture Documents
• The sum of the values consumers exchange for the bene ts of having or using the goods or
services
• Normally the amount of money exchanged for a product or service
• Price is what the customer is prepared to pay
Cost-based pricing vs Value-based pricing => value-based pricing has more potential to generate
pro t
How to set a price for a new technology?
• Consider what is customer willing to pay for the product? -> Value-based pricing
• Consider the cost of the item -> Cost-based pricing
• Consider the prices charged by the competition (direct and indirect competitors) -> competition-
based pricing
Market-penetration pricing - setting lower price in order to attract a large number of buyers and a
large market share.
• Based on the idea of experience curve - the more product you create the lower the cost of creating
these product (economies of scales)
• Not pro table at rst and may take a long time to meet break-even point
• Example: Amazon
• Apply when:
◦Consumers have highly elastic demand
◦There are signi cant learning e ects and economies of scales
◦It helps drive or keep out competitors
Promotion:
• Expenditure on advertising and other activities reinforces the value of the product in the mind of the
consumer.
• Price must be consistent with the promotion strategy and image.