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A business can use a variety of pricing strategies when selling a product or service. To determine the most effective pricing strategy for a company, senior executives need to first identify the company's pricing position, pricing segment, pricing capability and their competitive pricing reaction strategy. [ 1 ]
Pricing a new flowerpot with the EVC method. For example, assume that a company is introducing a flowerpot that requires less water and fertilizer for plants to grow. The traditional flowerpot is the next-best-alternative. Following are the main steps the company will undertake to determine the EVC:
Cost-plus pricing is a pricing strategy by which the selling price of a product is determined by adding a specific fixed percentage (a "markup") to the product's unit cost. Essentially, the markup percentage is a method of generating a particular desired rate of return. [1] [2] An alternative pricing method is value-based pricing. [3]
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Pricing confidence is an essential organizational characteristic which allows teams to sell the product confidently and believe in the price-worthy value of the product (Liozu et al., 2011). [19] Therefore, it is important that companies build up pricing confidence in a team, showing the team a better insight, creating more value from the product.
Non-price competition is a key strategy in a growing number of marketplaces (oDesk, TaskRabbit, Fiverr, AirBnB, mechanical turk, etc) whose sellers offer their Service as a product, and where the price differences are virtually negligible when compared to other sellers of similar productized services on the same marketplaces. They tend to ...
Pay what you want (or PWYW, also referred to as value-for-value model [1] [2]) is a pricing strategy where buyers pay their desired amount for a given commodity. This amount can sometimes include zero.
A price war is a form of market competition in which companies within an industry engage in aggressive pricing strategies, “characterized by the repeated cutting of prices below those of competitors”. [1] This leads to a vicious cycle, where each competitor attempts to match or undercut the price of the other. [2]