PRICE
SENSITIVITY
Sales volume is inversely related to price
The degree to which changing the price
influences sales volume is a function of
customers’ price sensitivity
The price–quantity relationship is specific When setting prices, a
to each offering and is quantified in manager must consider five
terms of an offering’s price elasticity: key factors
Setting a high price
Pricing as a
Demand is relatively Value-Creation
inelastic
Little or no competition for Process
the target segment
Cost is not a direct function
of volume
Market pioneer - No
sustainable CA SKIM PRICING
Company lacks the capital
required for large-scale
production
CUSTOMER BASED Managing
Setting a low price PRICING price
Demand is relatively
elastic PENETRATION
Fierce competition for PRICING
the target segment
Cost is a direct function D
of volume Cu
Market pioneer -
sustainable CA Cost-based pricing to
PSYCHOLOGICAL aff
PRICING Using the company’s co
costs as a benchmark. Competitive pricing
Using competitors’
prices as benchmark
Reference-price effects: By strategically choosing the reference price,
a company can frame the price of its offering in a way that makes it
more attractive to potential buyers, for example, by comparing it to a
SENSITIVITY
Sales volume is inversely related to price
The degree to which changing the price
influences sales volume is a function of
customers’ price sensitivity
The price–quantity relationship is specific When setting prices, a
to each offering and is quantified in manager must consider five
terms of an offering’s price elasticity: key factors
Setting a high price
Pricing as a
Demand is relatively Value-Creation
inelastic
Little or no competition for Process
the target segment
Cost is not a direct function
of volume
Market pioneer - No
sustainable CA SKIM PRICING
Company lacks the capital
required for large-scale
production
CUSTOMER BASED Managing
Setting a low price PRICING price
Demand is relatively
elastic PENETRATION
Fierce competition for PRICING
the target segment
Cost is a direct function D
of volume Cu
Market pioneer -
sustainable CA Cost-based pricing to
PSYCHOLOGICAL aff
PRICING Using the company’s co
costs as a benchmark. Competitive pricing
Using competitors’
prices as benchmark
Reference-price effects: By strategically choosing the reference price,
a company can frame the price of its offering in a way that makes it
more attractive to potential buyers, for example, by comparing it to a
