7. Pricing Strategy

Introduction

Key concepts covered in this chapter:

Price Premium

Reservation Price

Percent Good Value

Price Elasticity of Demand

Optimal Prices, Linear and Constant Demand

“Own,” “Cross,” and “Residual” Price Elasticity

“The cost of … lack of sophistication in pricing is growing day by day. Customers and Competitors operating globally in a generally more complex marketing environment are making mundane thinking about pricing a serious threat to the firm’s financial well being.”1

A full-fledged evaluation of pricing strategies and tactics is well beyond the scope of this book. However, there are certain key metrics and concepts that are fundamental to the analysis of pricing alternatives, and this chapter addresses them. ...

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