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Pricing Strategy

The document discusses various pricing strategies and concepts including cost-based pricing, customer value pricing, geographic pricing, discounts, markdowns, and allowances. It provides definitions and examples of these different strategies. The last part emphasizes avoiding pricing risks by understanding legal concerns and basing prices on economic value and willingness to pay.

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Roushie Nae
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695 views4 pages

Pricing Strategy

The document discusses various pricing strategies and concepts including cost-based pricing, customer value pricing, geographic pricing, discounts, markdowns, and allowances. It provides definitions and examples of these different strategies. The last part emphasizes avoiding pricing risks by understanding legal concerns and basing prices on economic value and willingness to pay.

Uploaded by

Roushie Nae
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Republic of the Philippines

Region IV-A CALABARZON


Province of Quezon
City of Tayabas

COLEGIO DE LA CIUDAD DE TAYABAS

EC- 308 Pricing and Costing


1st Semester AY: 2023-2024
Neo LMS – Module for Midterm
Week 7-8
- Avoid pricing risks by recognizing pricing legal concerns and why they sometimes have ambiguities.
- The role of pricing in value creation
- Economic value to the consumer, willingness-to-pay

PRICING STRATEGY
Reference: Chapter 2 of Pricing Strategy
by Dr. Marife Agustin-Aciento, DBA,LPT, FRI (Rs), CPME
Dr. Gilfred Abad-Acierto, PhD, LPT, FrieDr

Summary and Key Points to Remember

Figure 1: Lecture Summary Notes I have written on the board last October 10, 2023.
Continuation of Figure 1:

• Cost advantage – can be visualized between two business organizations.


• Cost-oriented Pricing – certainly costs are an important component of pricing.
• Customary Pricing – Some products remain the same for so long that they almost become a
tradition.
• Customer perceived value pricing – is that value which customers are willing to pay for a
particular product or services based on their perception about the products.
• Customer segment pricing – Many optimistic entrepreneurs assume that if they make their
products good enough, it can attract anybody and everybody regardless of age, gender, income
and a whole lot of other factors.
• Customer value based pricing – An increasing number of companies are basing their pricing on
the products perceived value.
• Dealing with perception of fairness – An oral communication refers to the manner inn which
retailers makes himself known to his prospective customers.
• Deceptive Reference Pricing – Defined as the price against which buyers compare the actual
selling price of the product, and thus, it facilitates their evaluation process.
• Demand-based price strategy – is when the firm sets the prices after researching consumer desires
and make sure the ranger of prices is acceptable to the target market.
• Differential pricing - can be also be referred to as discriminatory pricing which means that
changing different prices to different buyers for the same quality and quantity of the product.
• Variable cost are also known as the costs that do not vary production or sale revenue.
• The Japanese Method called as Target Costing is when costs change as a result of a concentrated
effort by designers, engineers and purchasing agents to reduce them. This method uses market
research to establish a new product’s desired function.
• Reference Pricing – defines how much customer expects to pay for a better in relation to other
competitor and the advertised price.
• Retail Markup - is the difference between the price of a product and the cost of that product.
• 4 Geographic Pricing:
a. Point or Prodcuction Pricing
b. Uniform delivered Pricing
c. Zone Pricing
d. Freight Absorption Pricing
• Reductions of Discounts:
➢ Discounts – reductions from list price given by a seller to buyers who either give up some
marketing function or provide the function themselves.
➢ Examples:
a. Buy one, get one free c. Trade-in credit
b. Early payment discount d. Volume discount

• Types of discounts:
➢ Cumulative Discounts - These are quantity discounts that aggregated over a stated period.
Such discounts are supposed to reflect economics in selling and encourage the buyer to
purchase from one seller.
➢ Noncumulative Discounts – These are one-time reductions in selling price to reflect the
following:
a. Number of units purchased
b. Size of the order
c. Or the product mix purchased
• A markdown is cutting down a certain amount of percentage from the merchandise original
price.
• Types of Markdowns
a. Seasonal Markdown
b. Temporary Markdown
c. Permanent Markdown
• Price discounts and allowances
a. Cash discount
b. Quantity discount
c. Functional discount/Trade discount
d. Seasonal discount
➢ Allowances - employed for the promotion of a product.
- Forms of allowance:
A. Trade-in Allowance
B. Promotional Allowance
✓ To avoid pricing risks, businesses need to recognize pricing legal concerns and why they
sometimes have ambiguities.
✓ Economic value is the value that person places on an economic good based on the benefit that
they derive from the good. It is often estimated based on the person's willingness to pay for the
good, typically measured in units of currency.

Prepared by:

Prof. Roushie Nae E. Bartolata, CPA


Part-time Professor

"Honesty is the first chapter in the book of wisdom."

-Thomas Jefferson

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