Product Pricing

Pricing strategy is the key to profitability and business success.  Effective pricing strategy requires a Pervasive Marketplace Awareness based on reliable data.  However, merely understanding the marketplace is insufficient. That information must be engaging and compelling of action through answering provocative what-if questions.   Your-Marketing-Toolkits provide that Pervasive Marketplace Awareness” and facilitates customer information driven business development based on affordable quantitative marketing research.   The toolkits are specifically design to provide the “hands-on” testing of pricing alternatives.   

Your-Marketing-Toolkit is not an end-point creation.  It grows, it is customized and it changes to meet the varying needs and distinction of businesses and their competitive pricing situations.  While the “look and feel” of the toolkits is intended to remain consistent, the set of tools and the information sources will vary.   The toolkits are designed around well structured marketing research methods.  Relatively simple methods can be used with modest number of respondents for exploratory issues such as the assessment of a new product concept.  However for more involved business situations and complicated pricing problems more complex customer measurement and analyses are needed.  The toolkits are designed to be modified to allow these additional sources of information to be integrated.     

Strategic pricing centers around knowledge of the price demand function.  That is effective pricing relies on understanding how sales will change with changes in the product price and the competitive prices.  Marketing research methods have been developed to measure these demand functions on a variety of conditions.  The simplest, concept testing, simply probes the market response to suggested prices or solicits acceptable prices under given conditions.  This approach is used in Your-Marketing-Toolkit for initial price analysis for new product concepts.  However, for more complex and realistic conditions, complete choice analysis where potential customers are asked to respond to a complete set of competitive products at various prices is used.  This allows for a broader range of analysis and perspectives.

How does sales respond to changes in price?

The competitive pricing model allows for testing of the impact on share of various competitive prices.  As previous mentioned the competitive market information is usually obtained based on a complete choice analysis market research exercise.  It is the basis of all of the pricing analysis.




What is the optimum product price?

The price that maximizes the product earnings is referred to as the optimum price.  This is shown as a dynamic profile of earnings and demand.  Note that these curves will change with changes in the competitive product prices as well as changes in the assumed manufacturing and marketing costs.  While it does represent optimum condition for the product earnings, it may not be the best when there are multiple products being offered by the firm.




How should we price a set of competing products?

When a firm offers a number of products into a single market, the pricing situation is more complex.  The demand for the products may interact.  Rather than just looking at the product earnings in this case we need to examine the total firm’s earnings from all of the products.  In the case of two products this can be analyzed as a map.







What pricing strategy should we follow?

While the optimum prices are good price references they may not reflect the strategic situation.  Value maps which include the optimum price ranges are used to examine the strategic implications to the pricing strategy.


Applications of Your-Marketing-Toolkit

·   Overall

·   The Marketing War Room

·   Business Assessment

·   Product Design

·   Offering Design

·   Product Pricing

·   Segmentation

·   Marketing Six Sigma

·   Branding

·   Customer Satisfaction

·   Reseller Analysis

·   Innovation





For more information on developing Your-Marketing-Toolkits:

Eugene B. Lieb

Custom Decision Support, LLC

(831) 854-2256