OnDemand WTP Pricing Research

DENNIS ZINK: My two cents on pricing | Herald-Tribune

According to Wikipedia, 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, brand, and quality of product.

Pricing is one of the four P’s of the marketing mix. It is the only revenue-generating variable. Product, promotion, and place are cost centers, and they contribute to decreasing price elasticity. They enable price increases to drive revenue and profits.

Consumer needs may be converted into demand only if the consumer has the willingness and ability to buy the product offered. Pricing is used as a tactical decision in response to market situations. It is a fundamental aspect of financial modeling. While there are dozens of concepts related to pricing, I will focus on some of the more common variables.

Break-even point — This is the point where total costs equal total revenue. Profit is zero.

Bait-and-switch — Advertising goods at a low price (bait), with the intention of substituting inferior or more expensive goods (switch). Bait-and-switch is a form of retail sales fraud. For proper legal action to be taken, there must be proof that the fraud was completely intentional and part of a greater selling scheme.

Cost plus pricing — A pricing strategy where selling is determined by adding a specific dollar markup to a product’s unit cost.

Drip pricing — An advertised price plus additional fees charged for other items.

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DENNIS ZINK: My two cents on pricing.