Market-Oriented Pricing

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Overview

An important contribution to marketing literature, this volume offers a comprehensive guide to market-based pricing strategies. The authors present pricing as a relatively simple, but extremely powerful marketing tool—a creative variable which managers can manipulate to accomplish a wide variety of ends. Arguing that companies must move away from the traditional, short-term, reactive methods relied upon to set and manage prices, the authors call for a systematic, strategic and market-based approach to the pricing problem. Their central unifying theme is that pricing begins and ends with the customer and that every pricing action should be part of a larger pricing program build around the realities of customer needs and competitor pressures. Written with a minimum of jargon and amply illustrated with explanatory tables and figures, this is an excellent introduction to pricing for both seasoned and aspiring marketing and product managers.

Morris and Morris begin by examining the overall concept of price as a statement of value. Subsequent chapters offer in-depth guidance on the development of market-based pricing, addressing such critical issues as pricing strategy over the product life cycle, linking pricing and marketing strategy, understanding and using elasticity, the psychology of pricing, and negotiating prices with customers. Particular attention is paid to the question of price differentials—charging different prices to different classes of consumers—and the legal and ethical ramifications of adopting strategies based on price differentials. The authors also explore cost-based pricing, industry and competitor analysis, pricing across the product line, and computers as an aid in pricing. Throughout, references to real-world cases and problems helps the manager to relate the concepts of market-based pricing to the pricing decisions and considerations actually confronted on the job.

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Product Details

  • ISBN-13: 9780899304021
  • Publisher: ABC-CLIO, Incorporated
  • Publication date: 4/24/1990
  • Pages: 222
  • Lexile: 1340L (what's this?)
  • Product dimensions: 6.00 (w) x 9.00 (h) x 0.63 (d)

Meet the Author

MICHAEL H. MORRIS is Associate Professor of Marketing at the University of Central Florida.

GENE MORRIS is an independent marketing consultant residing in Virginia and has consulted with a number of corporations in the areas of strategic planning, pricing, and new market assessment.

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Table of Contents

Illustrations
Foreword
Preface
1 Introduction: Price as a Statement of Value 1
Creating Customer Value 1
Price and Value 2
What Is Value? 3
Value Is Perceptual 4
Value and Quality Are Different 5
Sources of Value 5
Value over a Product's Useful Life (EVC) 6
How to Manage Value: Focusing Inside the Firm 9
How to Manage Value: Focusing on the Customer 14
Price Is a Creative Variable 15
2 Developing Pricing Programs 19
The Need for Strategic Pricing Programs 19
The Role of Price Objectives 20
Establishing a Strategy 20
Developing a Structure 23
Determining Price Levels and Related Tactics 25
Putting the Four Together 26
Linking Pricing Strategy to Marketing Strategy 28
Pricing Strategy over the Product Life Cycle 29
Pricing for Products versus Services 32
The Underlying Determinants of Price 34
3 Understanding and Using Elasticity 39
The Nature of Demand 39
Defining Elasticity and Its Characteristics 41
Determinants of Elasticity 42
Managerial Implications of Elasticity 44
Elasticity and Market Segmentation: Changing Differentials 45
The Calculation of Price Elasticities 48
Approaches to Elasticity Measurement 51
4 The Psychology of Pricing 55
Demand Revisited: How Do Buyers Actually Respond to Price? 56
The Concept of Reference Prices 57
Can Customers Accurately Recall Prices? 60
Price Thresholds and Weber's Law 61
Adaptation Theory and Pricing 62
Assimilation and Contrast Effects 63
Is There a Price-Quality Relationship? 64
The Effectiveness of Odd Pricing 66
5 Negotiating Prices With Customers 71
Negotiations Begin Internally 71
The Nature of Customer Negotiations 73
Negotiation Objectives 74
A Strategic Approach to Negotiation 76
Aspirations and Concessions 83
Building a Long-Term Relationship 84
6 Examining Costs from a Market Perspective 87
The Logic of Cost-Based Pricing: Simplicity 87
The Danger of Cost-Based Pricing: Lost Profits 90
The Contribution Approach 93
Applying Contribution Analysis: An Initial Pricing Decision 96
Applying Contribution Analysis: A Price Change 97
The Contribution Income Statement 99
Cost-Volume-Profit Relationships 100
Economies of Scale and the Experience Curve 101
A Strategic Perspective on Costs 102
7 Industry and Competitor Analysis 107
Evaluating Industry Structures 108
Prevalent Competitive Pricing Behaviors 112
Defining Competitive Positions 115
Pricing for Competitive Bids 119
8 Pricing Across the Product Line 125
Cross-Elasticity: Complements and Substitutes 126
The Problem of Cannibalism 127
Relating Product Line Decisions to Overall Profitability 129
Maximizing Product Line Profitability: A Case Study 133
Determining Price Differentials within the Product Line 134
Creativity in Product Line Management 136
The Role of Discounts in the Product Line 139
9 Legal and Ethical Aspects of Pricing Decisions 143
Legislation Governing Pricing Activities 144
Key Aspects of the Robinson-Patman Act 145
Penalties under the Law 149
Price Behaviors that Raise Legal Questions 149
Resale Price Maintenance and Price Administration 152
Price Discrimination 153
Deceptive Practices and Price 158
Ethical Aspects of Pricing 158
10 Computers as an Aid in Pricing 163
Capabilities of Electronic Data Processing 163
The Limited Computer Skills of Managers 164
Building a Pricing Data Base 164
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