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Selecting a Pricing method

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Fangyin YUAN

on 20 September 2012

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Transcript of Selecting a Pricing method

Selecting A Pricing Method Six price-setting methods 1. mark-up pricing
2. target-return pricing
3. perceived-value pricing
4. value pricing
5. going-rate pricing
6. auction-type pricing Mark-up pricing cost plus percentage mark-up on cost
mark-up price=costs+(costs*desired ROS)
common among the contractors, lawyers, chartered accountants, manufacturing companies for pricing job orders, etc.
3 reasons for mark-up pricing remain popular
work only price brings expected sales level Target Return Pricing cost plus required rate of return on investment
target return price=costs+ (costs*ROI)
adopted in public investment companies, large scale manufacturing companies, etc. Perceived-Value Pricing market price is calculated on the basis of customers' perceptions about a product
made up of several elements e.g. buyer's image of the product performance, the channel deliverables, the warranty quality, customer support and softer attributes
extensively used in non-durable consumer goods manufacturing companies e.g. cosmetics, food, cleaning product, clothing, etc.
key-to deliver more value than the competitors and to demonstrate this to prospective buyers Value Pricing pricing high quality products at fairly low level
matter of re-engineering to become a low cost producer without affecting quality
extensively used in personal computer manufacturing, electronic goods industry and etc.
everyday low pricing (EDLP, deep discounts)
high-low pricing (shallow discounts) Going-Rate Pricing the price is based on prices of existing products in the market
used in pricing paper. cement, fertilizers, steel, petrol and chemical industries Auction-Type Pricing 1. English auctions (ascending bids)
one seller and many buyers (e.g. Yahoo & eBay)
bidders raise the offer price until the top price is reached
antiques, cattle, real estate, and used equipment and vehicles 2. Dutch auctions (descending bids) one seller and many buyers, or one buyer and many sellers auctioneer announces a high price
and slowly decreases the price until a
bidder accepts it buyer announces sth he/she wants to buy and potential sellers compete with offering lowest price to get the sale 3. Sealed-bid auctions competitive-oriented pricing
expected profits- won't bid below its cost but can't bid too high for fear of losing job
suitable for sellers making many bids Pricing method for eBay services
insertion fee (category and listing format)
final value fee (category and listing format)
fees for any optional features and services you may use
PayPal fees An estimated 1.5 million tons of oil has spilled in the Niger Delta ecosystem over the past 50 years. This amount is equivalent to about one “Exxon Valdez” spill in the Niger Delta each year. Many of the spills have taken place insensitive habitats for birds, fish and other wildlife, leading tofurther loss of biodiversity and, in turn, further impoverishment of local communities. The spills pollute local water sourcesthat people depend on for drinking, cooking, bathing, laundering and fishing. They also release dangerous fumes into the air, sometimes rendering villages uninhabitable and causing serious illness for those who are unable to relocate. Many of the oil spills can be attributable to poorly maintained infrastructure such as aging pipelines. Environmental groups in Nigeria and Europe have filed alawsuit against Shell in the Netherlands for its history of oil spills and lack of cleanup in Nigeria. According to the Nigerian environmental group involved in the suit, cleanup ofoil spills is often very superficial, sometimes involving little more than turning the land so that the oil remains justbeneath the surface of the soil. Reference List Burton, Suzan etl. 2009, Chapter 14 :Developing Pricing Strategies And Programs, Marketing Management, Pearson Education, Australia, pp. 419-424
Maeconomics 2009, Pricing Strategy, viewed at 1 May 2009, <http://www.scribd.com>
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