Market and Competition in Pricing Strategy

Start Date: 07/05/2020

Course Type: Common Course

Course Link: https://www.coursera.org/learn/uva-darden-bcg-pricing-strategy-market-competition

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About Course

If you haven’t considered what the competition is charging, you may not be maximizing your revenue. Spend time analyzing the market and you can influence price and improve margins. In this course, we'll show you how to implement competitive pricing and avoid common legal pitfalls of market-based pricing. You will also learn how to predict, influence and respond to competitors’ pricing moves. Led by Darden faculty and Boston Consulting Group global pricing experts, this course provides an in-depth understanding of market-based pricing and how to use it to capture more revenue.

Course Syllabus

Welcome! Competitive pricing is all about setting prices based on what companies with similar products and services charge. To use this approach effectively, you have to understand the playing field. In particular, you need to know general legal parameters that guide competition in the market place. In this module, you'll get basic background knowledge so that you can use market knowledge in your pricing strategy and still stay on the right side of antitrust law. Then Thomas will join you to introduce the competitive pricing framework , which you can use to assess pricing options, anticipate your competitors' pricing strategy, and determine whether to price to competition or to elasticity.

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Course Introduction

Market and Competition in Pricing Strategy In this course, you’ll learn how to use knowledge of market dynamics to set competitive prices and exclude others. We’ll focus on the key factors affecting price and volume in a business setting, while taking a holistic approach to understanding market dynamics. We’ll look at the pricing controls on a firm’s assets (liabilities and stocks), the pricing of a product or service, and the pricing of its inputs, whether those are quantity- or quality-based. Finally, we’ll look at the different types of payments--cash, credit, debit, prepaid--and how they’ll affect prices and volume. You’ll also learn how to use the knowledge you’ll gained in this class to set firm’s prices and exclude others. We’ll cover the entire spectrum of pricing strategy, including pricing strategy for assets, pricing strategy for assets, pricing strategy for liabilities and stocks, and pricing strategy for inputs.Week 1: Pricing Strategy and Assets Week 2: Pricing Strategy for Assets Week 3: Pricing Strategy for Liabilities and Stocks Week 4: Pricing Strategy for Stocks Mining, Metallurgy & Design Develop a solid understanding of the materials and manufacturing processes that make steel, aluminum, and aluminum products so durable and competitive. Learn about key concepts in the materials department of the manufacturing industry: fundamentals, microstructure

Course Tag

Competitor Pricing Models Pricing Strategies Pricing to Competition Price Discrimination Market Segmentation

Related Wiki Topic

Article Example
Pricing Pricing factors are manufacturing cost, market place, competition, market condition, quality of product.
Pricing Marketers develop an overall pricing strategy that is consistent with the organisation's mission and values. This pricing strategy typically becomes part of the company's overall long -term strategic plan. The strategy is designed to provide broad guidance to price-setters and ensures that the pricing strategy is consistent with other elements of the marketing plan. While the actual price of goods or services may vary in response to different conditions, the broad approach to pricing (i.e., the pricing strategy) remains a constant for the planning outlook period which is typically 3–5 years, but in some industries may be a longer period of 7–10 years.
Pricing strategies Companies or firms that tend to get involved with the strategy of predatory pricing often have the goal to place restrictions for other new businesses from entering the share market. It is an unethical act which contradicts against the anti – trust law, setting the market as a game of monopoly. Predatory pricing mainly occurs during price competitions in the market as it is an easy way to blind sight the unethical and illegal act. Due to this strategy, in the short term consumers will be benefited and satisfied. However, firms will not be benefited in the long term as this same strategy will be continued to be used by other businesses against each other, because of the increase in competition within the market causing major losses. This strategy is dangerous to be practiced as it could impact firms to face major destructions and even cause the business to shut down completely.
Dynamic pricing Dynamic pricing, also referred to as surge pricing, demand pricing, or time-based pricing is a pricing strategy in which businesses set flexible prices for products or service based on current market demands. Businesses are able to change prices based on algorithms that take into account competitor pricing, supply and demand, and other external factors in the market. Dynamic pricing is a common practice in several industries such as hospitality, travel, entertainment, retail, electricity, and public transport. Each industry takes a slightly different approach to repricing based on its needs and the demand for the product.
Penetration pricing Penetration pricing is a pricing strategy where the price of a product is initially set low to rapidly reach a wide fraction of the market and initiate word of mouth. The strategy works on the expectation that customers will switch to the new brand because of the lower price. Penetration pricing is most commonly associated with marketing objectives of enlarging market share and exploiting economies of scale or experience.
Supracompetitive pricing Supracompetitive pricing is pricing above what can be sustained in a competitive market. This may be indicative of a business that has a unique legal or competitive advantage or of anti-competitive behavior that has driven competition from the market.
Penetration pricing In an empirical study, Martin Spann, Marc Fischer and Gerard Tellis analyze the prevalence and choice of dynamic pricing strategies in a highly complex branded market, consisting of 663 products under 79 brand names of digital cameras. They find that, despite numerous recommendations in the literature for skimming or penetration pricing, market pricing dominates in practice. In particular, the authors find five patterns: skimming (20% frequency), penetration (20% frequency), and three variants of market-pricing patterns (60% frequency), where new products are launched at market prices. Skimming pricing launches the new product 16% above the market price and subsequently increases the price relative to the market price. Penetration pricing launches the new product 18% below the market price and subsequently lowers the price relative to the market price. Firms exhibit a mix of these pricing paths across their portfolios. The specific pricing paths correlate with market, firm, and brand characteristics such as competitive intensity, market pioneering, brand reputation, and experience effects.
Pricing Pricing is the process whereby a business sets the price at which it will sell its products and services, and may be part of the business's marketing plan. In setting prices, the business will take into account the price at which it could acquire the goods, the manufacturing cost, the market place, competition, market condition, brand, and quality of product.
Pricing strategies Penetration pricing strategy is usually used by firms or businesses who are just entering the market. In marketing it is a theoretical method that is used to lower the prices of the goods and services causing high demand for them in the future. This strategy of penetration pricing is vital and highly recommended to be applied over multiple situations that the firm may face. Such as, when the production rate of the firm is lower when compared to other firms in the market and also sometimes when firms face hardship into releasing their product in the market due to extremely large rate of competition. In these situations it is appropriate for a firm to use the penetration strategy to gain consumer attention.
Pricing strategies A firm that uses a penetration pricing strategy prices a product or a service at a smaller amount than its usual, long range market price in order to increase more rapid market recognition or to increase their existing market share. This strategy can sometimes discourage new competitors from entering a market position if they incorrectly observe the penetration price as a long range price.
Predatory pricing Nowadays predatory pricing is considered anti-competitive in many jurisdictions and is illegal under competition laws. However, it can be difficult to prove that prices dropped because of deliberate predatory pricing rather than legitimate price competition. In any case, competitors may be driven out of the market before the case is ever heard.
Pricing Broadly, there are six approaches to pricing strategy mentioned in the marketing literature:
Market entry strategy Many companies successfully operate in a niche market without ever expanding into new markets. Some businesses achieve increased sales, brand awareness and business stability by entering a new market. Developing a market-entry strategy involves a thorough analysis of potential competitors and possible customers. Some of the relevant factors that are important in deciding the viability of entry into a particular market include trade barriers, localized knowledge, price localization, competition, and export subsidies.
Pricing Pricing can be approached at three levels: the industry, market, and transaction level.
Service parts pricing These and other characteristics of the after-sales market give Service Parts Pricing a life of its own. Companies are realizing that they can use the lever of service part pricing to increase profitability and don't have to take prices as market determined. Understanding customer needs and expectations, along with the company's internal strengths and weaknesses, goes a long way in designing an effective service part pricing strategy.
Pricing "Premium pricing" (also called prestige pricing) is the strategy of consistently pricing at, or near, the high end of the possible price range to help attract status-conscious consumers. The high pricing of a premium product is used to enhance and reinforce a product's luxury image. Examples of companies which partake in premium pricing in the marketplace include Rolex and Bentley. As well as brand, product attributes such as eco-labelling and provenance (e.g. 'certified organic' and 'product of Australia') may add value for consumers and attract premium pricing. A component of such premiums may reflect the increased cost of production. People will buy a premium priced product because:
Service parts pricing Value based pricing decouples part prices from the part costs and thus provides stability to the prices. Combining value based pricing with market based pricing can result in better market segmentation and better targeted prices. Value based pricing may also uncover competitive niches for a company and allow them to command higher margins than their peers in the market.
Market penetration Businesses can also increase their market penetration by offering promotions to customers. A promotion is a strategy often linked with pricing, used to raise awareness of the brand and generate profit to maximise their market share (McGrath, 2001).
Pricing strategies This strategy is employed only for a limited duration to recover most of the investment made to build the product. To gain further market share, a seller must use other pricing tactics such as economy or penetration. This method can have some setbacks as it could leave the product at a high price against the competition.
Premium pricing Premium pricing (also called image pricing or prestige pricing) the practice of keeping the price of a product or service artificially high in order to encourage favorable perceptions among buyers, based solely on the price. The practice is intended to exploit the tendency for buyers to assume that expensive items enjoy an exceptional reputation or represent exceptional quality and distinction. A premium pricing strategy involves setting the price of a product higher than similar products. This strategy is sometimes also called skim pricing because it is an attempt to “skim the cream” off the top of the market. It is used to maximize profit in areas where customers are happy to pay more, where there are no substitutes for the product, where there are barriers to entering the market or when the seller cannot save on costs by producing at a high volume.