Price Decisions in the Marketing Mix

Some examples of pricing decisions to be made include:

• Pricing strategy (skim, penetration, etc.)
• Suggested retail price
• Volume discounts and wholesale pricing
• Cash and early payment discounts
• Seasonal pricing
• Bundling
• Price flexibility
• Price discrimination

Frequent mistakes are determining prices Mark-up pricing and Competitive match pricing.

Which price maximizes long-term profits?

• Customer perceived benefits and price elasticity
• Competition (now and later)
• Business model
• Psychological effect
• Segmentation and positioning

Value creation per unit looks like this:

Tests to determine price elasticity:

Method	Advantages	Disadvantages
Price experiments	* Fast * Low risk * Many variants can be tested	* External validity (transfer?) * Internal validity (too strong simplification
Classic market tests	* Realistics * Allows for good predictions	* Reaction to heterogeneous prices? * Positioning jeopardized? * High cost / time
Tests over the internet	* Realistic * Very fast * Limited cost and time	* Reaction to heterogenous prices? * "Unfair"? (Amazon) * Long range effects? * Not suitable for all distribution channel

Part of Marketing mix (Four P's of marketing)