Theme of the lecture №2.

Thesis:

Pricing is the process of determining what a company will receive in exchange for its products. Pricing factors are manufacturing cost, market place, competition, market condition, and quality of product. Pricing is also a key variable in microeconomic price allocation theory. Pricing is a fundamental aspect of financial modeling and is one of the four Ps of the marketing mix. The other three aspects are product, promotion, and place. Price is the only revenue generating element amongst the four Ps, the rest being cost centers.

Pricing is the most effective profit lever. Pricing can be approached at three levels. The industry, market, and transaction level. Pricing at the industry level focuses on the overall economics of the industry, including supplier price changes and customer demand changes. Pricing at the market level focuses on the competitive position of the price in comparison to the value differential of the product to that of comparative competing products. Pricing at the transaction level focuses on managing the implementation of discounts away from the reference, or list price, which occur both on and off the invoice or receipt. There are numerous terms and strategies specific to pricing:

–Line pricing

–Loss leader

–Price/quality relationship

–Premium pricing

–Demand-based pricing

–Multidimensional pricing

Literature: 1-36.