Application: NPD/NSD, Revenue Planning, Sales, Communication

Figure P.5: Factors affecting pricing decisions

Source: Dibb, S. et al., 2006


The Concept

Obviously, a very important part of the perceived value of an offer is the price that customers are charged and the way that it is charged. This is a complex mix of the costs of creating the offer, demand and supply economics in the industry, industry custom and practice, segmentation variables, and brand dynamics. Marketers ought to step back and consider all of these factors in setting prices. For instance, as discussed in the market definition entry, different industries create their own beliefs and practices with which customers collude. The pricing of flights in the airline industry, for example, is a complex process of different deals, add-ons, and fixed prices which confuses and annoys. It is a complete contrast to, say, some retail practices. It is sensible, and not academic or theoretical, to step back and consider whether the right mix of features (see separate entry) and right pricing mechanism have been used to create a sense of perceived value for the segment for which the offer is designed.

Too many marketers, it seems, take a tactical approach to pricing or leave it to other functions (like finance). Pricing, ...

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