...ARTICLE SUMMARY OF CUSTOMER VALUE-BASED PRICING STRATEGIES: WHY COMPANIES RESIST Basically this paper discussed the challenges that company faced in implementing the value based pricing strategy and recommendation how to win over other approaches namely cost-based pricing, and competition-based pricing. Costumer value-based pricing is defined as the factor in determining the product price is depend on the product value and service quality deliver to customers. In other word, the price of the product or service is depending on its performance. The more value customers perceive on the product, the more expensive the product will be. Meanwhile, cost-based pricing approach is the price of the product is gathered after the cost of the product is considered. On the other hand, competition-based approach is the price of the product is determined based on the price of competitors’ product. Normally, it follows the average markets price. In addition, each approach has its own strength. For instances, data for both cost-based and competition-based pricing are easy to access since it already available. While, customer value-based pricing is takes into consideration of customer perception in pricing its product or service. Thus, the segmented customers could afford to buy the product or service. Nevertheless, researcher found that the main strength of customer value-based pricing has competitive advantages over other two approaches especially in pricing of new product. But in reality, industries...
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...Customer value-based pricing strategies: why companies resist Andreas Hinterhuber Andreas Hinterhuber is based at Hinterhuber and Partners, Innsbruck, Austria. Introduction Pricing has a huge impact on profitability. Pricing strategies vary considerably across industries, countries and customers. Nevertheless, researchers generally concur that pricing strategies can be categorised into three groups: 1. cost-based pricing; 2. competition-based pricing; and 3. customer value-based pricing. Of these, customer value-based pricing is increasingly recognised in the literature as superior to all other pricing strategies (Ingenbleek et al., 2003). For example, Monroe (2002, p. 36) observes that: ‘‘ . . . the profit potential for having a value-oriented pricing strategy that works is far greater than with any other pricing approach’’. Similarly, Cannon and Morgan (1990) recommend value pricing if profit maximisation is the objective, and Docters et al. (2004, p. 16) refer to value-based pricing as ‘‘one of the best pricing methods’’. Practitioners have also recognised the advantages of value-based pricing strategies. Several companies have successfully adopted such strategies. These include pharmaceutical companies such as Sanofi-Aventis, information technology companies such as SAP and Vendavo, wireless internet service providers such as the Australian company Xone, airlines such as Lufthansa, vehicle manufacturers such as BMW, and biotech companies such as Tigris Pharmaceuticals...
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...and Urban Eco-Shack invented by Doug and Paul will be launched to penetrate the market. The challenges of marketing strategy will be faced by Doug and Paul because these two owners have no experience on marketing. In order to attract the customer attention and preference, brand positioning and value-based pricing strategy will be used to implement as marketing programs. In the long-run sustainability and growth, Doug and Paul will consider using the loyalty program to keep long term relationship with customers. Table of Contents Executive Summary 1 1.0. Introduction 3 1.1. Purpose 3 1.2. Case Summary 3 1.3. Relevant marketing theory definition and explanation 4 2.0. Problem/Issues Identification 5 3.0. Issue Analysis 6 3.1. Market Segmentation 6 3.2. Targeting consumers 7 3.3. Product positioning and branding strategy 8 3.4. Marketing mix (only pricing strategy focus) 8 3.5. SWOT Analysis 9 4.0. Recommendations/Choices of Solution 10 5.0. Conclusion 11 List of Reference 13 1.0. Introduction 2.1. Purpose Many organizations spend a lot of time, resources, and energy setting up the new business from sustainability to growth. Festus M Epetimehin (2011) stated that although it is important to replace lost business, one of the primary goals should be to keep existing customers and enhance customer relationships. Thus, the main purpose of this report is to analyze the given case study which is “Marketing the Eco-Shack”...
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...Chapter 4: Components of Compensation Strategy * The first strategic decision is about the relative proportions of base pay, performance pay, and indirect pay to include in the compensation mix. * Three other choices follow – what method(s) should be used for establishing base pay, what type(s) of performance pay(if any) should be provided, and which elements of indirect pay should be included. Compensation Mix choices: Base pay job evaluation, market pricing, and pay for knowledge Performance pays individual performance, group performance, and organization performance Indirect pay Mandatory benefits, pension plan, health and life insurance, pay for time not worked, employee services, and other benefits. Base pay: * Base pay: is the portion of an individual’s compensation that is based on time worked not on the output produced or results achieved. * Base pay accounts for 75 to 80 percent of the compensation for a typical employee, performance pay about 5 to 10percent, and indirect pay about 15 percent of the total compensation. However these proportions vary across firms. * Base pay is guaranteed by the employer if a person works for a certain amount of time; he or she is paid a prespecified amount of money. In some case, this amount is calculated on a hourly basis, in others daily, in others weekly, or monthly, or annually. * When base pay is calculated on an hourly basis, base pay is known as wage * When base pay is calculated...
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...migration of the company up the value chain? Infosys is a highly respected, India-based information technology (IT) software service provider, established in July 1981. The ramp-up of the company has been particularly spectacular during the last several years, starting from 1995. The initial business model related to labor arbitrage and was based upon differential wage rates for IT professionals in India and the developed countries. The boom of the late 1990s, catalyzed by the Y2K-related problems, resulted in opportunities that the company capitalized upon. Today the company serves clients drawn from global 2000 companies. Based upon its strong ethical and principled approach, execution excellence, relentless quest for quality and customer satisfaction, the company had astounding financial success and became a darling of the stock markets both in India and the United States. Notwithstanding its successful track record, Infosys has over the last several years, proactively been applying itself to a fundamental question of identifying the drivers of success for the next 10 years. Infosys has been deeply concerned about leveraging its current strong position, to evolve into a much stronger company, so as to ensure continued growth and success in the long-term. Main drivers that have contributed to drive the top management of Infosys to move up the value chain are below: * International Competitiveness * Overseas Expansion * Outsourcing Strategy * International...
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...very competitive and price sensitive marketplace. We believe that the company is well positioned to continue to meet its sales and revenue targets while maintaining profit margin. However, we think that in order to remain ahead of our competitors, our investment looking forward needs to be in our greatest asset, our employees. The introduction and roll out of the balanced scorecard method to create an individually responsive and responsible organization that exceeds our upcoming aggressive performance targets. The balanced scorecard is a tool that we believe will align individual objectives with business objectives to ensure the continued success of PepsiCo. The following information describes where we are today as an organization, what the balanced scorecard can do for our organization, and some critical success factors to address during implementation. PepsiCo in brief: PepsiCo was founded in 1965 through the merger of Pepsi-Cola and Frito-Lay. In the year of 1998 PepsiCo then acquired Tropicana and in the year 2001 Quaker Oats and Gatorade. The company consists of four subsections; Frito-Lay North America, PepsiCo Beverages North America, PepsiCo International and Quaker Foods North America. The products are available in 200 countries and even have some brand names that are more than 100 years old. PepsiCo employs 153,000 people that follow a mission, "To be the world's premier consumer products company focused on convenient foods and beverages. We seek to produce healthy...
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...women. Central market sells lots of fruits to people. 3. Explain the ‘marketing philosophy’. What is the difference between the ‘marketing philosophy’ and a ‘market orientation’? Marketing philosophy: a) Production concept----focus on manufacturing efficiency b) Product Concept----focus on quality - as the firm sees it c) Selling Concept----focus on ‘just sell it’ d) Marketing Concept----achieving goals depends on knowing needs and fulfilling them e) Societal Marketing Concept----is serving individual wants what’s best in the long run Marketing orientation is to know the demand and need of customers and create customer value from the information. Marketing concept is an attitude to customer, companies focus on what customers need and understand customers deeply and create the products customers want. 4. Discuss the new marketing challenges in the 21st century as per chapter 1.s a) Growth of non-profit marketing b) Rapid globalisation c) IT & Electronic marketing d) Changing world economy e) Ethics and social responsibility f) Accountability g) Market orientation h) New market landscape 5. The text discusses the growth of marketing activity among not-for-profit organisations. Think of a non-profit organisation that has prominent marketing activity. How does a not-for-profit fit into the marketing system shown on p.11? Who would be some of the intermediates...
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...of potential customers. As individuals, we continually position ourselves. The responsible older sibling, the class clown, a number cruncher, a super genius are all examples of positioning. These identifiers help us define ourselves and distinguish our abilities as unique and different from other people. Positioning is a powerful tool that allows you to create an image. And image is the outward representation of being who you want to be, doing what you want to do, and having what you want to have. Positioning yourself can lead to personal fulfillment. Being positioned by someone else restricts your choices and limits your opportunities. That's why it's so important for entrepreneurs to transform their passion into a market position. If you don't define your product or service, a competitor will do it for you. Your position in the market place evolves from the defining characteristics of your product. The primary elements of positioning are: * Pricing. Is your product a luxury item, somewhere in the middle, or cheap, cheap, cheap. * Quality. Total quality is a much used and abused phrase. But is your product well produced? What controls are in place to assure consistency? Do you back your quality claim with customer-friendly guarantees, warranties, and return policies? * Service. Do you offer the added value of customer service and support? Is your product customized and personalized? * Distribution. How do customers obtain your product...
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...ONUR TAMUR PRICING WHEN ENTERING A NEW MARKET IN B2B ENVIROMENT: Understanding the B2B Dynamics Seminar Report ii ABSTRACT With the rise of globalization and saturated local markets, many companies started chasing international opportunities that would help them expand to new countries and increase their brand recognition around the globe. One of the challenges that companies face while entering a new market is defining the right price and pricing of their offering to be competitive and successful in the market. In B2B area, there are not any wide research on pricing issues that companies face in the markets that they are planning to enter and the effects of business relations on pricing. This paper focuses on market entry strategies and market entry modes, the fundamentals of pricing in a new market and the differences of B2B and B2C pricing. The study covers market entry modes and its impact on profitability, value creation in B2B area and the key aspects of pricing behaviour while entering a new market. This study in general provides a framework for implementing the right pricing strategy while entering new markets and defining the right pricing behaviour in B2B environment. This framework enables companies to understand the dynamics of B2B environment covering buyer-supplier and distributors relations and providing pricing models for companies to be a competitive player. Tamur, O. iii PREFACE This paper discusses the concepts of pricing and pricing behaviour...
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...Chapter 5 Pricing strategies LEARNING OBJECTIVES After reading this chapter you will: n n appreciate the strategic significance of pricing decisions in marketing strategy understand the approaches to pricing of the economist and accountant, together with their contributions and limitations in the context of the price setting process n apply a framework to pricing decisions based around the key inputs to these decisions n understand the main pricing methods and their relative advantages and disadvantages 160 Pricing strategies INTRODUCTION The price of a company’s products and services represents the vehicle for that company to achieve its financial objectives. It is through price and volume that revenue is generated. Price equates to the financial sacrifice that the customer is willing to make to purchase the product or service desired. The important criterion of pricing is problematical to marketers. This is attributed to the uncertainty associated with pricing decisions as it is a complicated area of decision making. It is with a view to examining this problem and the ways in which it can be resolved that his chapter is framed. The pressures of today’s market environment place increasing burdens on management. It is important, therefore, that the decision maker has a framework for making pricing decisions. We start by examining the traditional economist’s view of price to illustrate both the shortcomings and potential contributions of this approach as a prelude to discussing...
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...Firms Strategies to Stay Competitive in the Market Table of Content ......................................... -2- Introduction ................................................ -3- Differentiation Strategy ................................ -4- Benefits & Challenges of Differentiation Strategy .................... -5- Apple ..................................................................................... -6- Low Cost Strategy ................................................................... -7- Benefits, Challenge &Mistakes of Low Cost Strategy ................ -8- Interview .............................................................................. -11- Conclusion............................................................................. -15- In the beginning, I would like to explain the major problem that is associated with economy in the whole world which is scarcity. We know that humans are greedy and they always want more of everything, so that is why we have the problem of not having enough resources to all people. Firms try to satisfy their customers by thinking of strategies that can make their customers satisfied and to stay competitive in the market. Looking from this perspective, I would like to introduce my topic about Firms Strategies to Stay Competitive in the marketplace. Firms can remain competitive through a lot of planned strategies. Being a competitor in the market requires constant monitoring of the...
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...another convenient location. The second, which normally takes place at our nearest office, involves three 45-minute meetings with one or more of A.T. Kearney’s senior people. If you are invited to complete the full sequence, you can expect that both interviews in the first round and two in the second will be case-oriented. This means that in addition to discussing our firm and your future it, the A.T. Kearney consultants you meet will also present you with real-world business problems and ask you to develop solutions. Experience shows that the applicants who are the most successful in a case interview are those who enter it with the right frame of mind and the best preparation. The following information is designed to help you achieve both. Why The Case Format? While we look for many qualities in an applicant, the most important is his or her ability to think and communicate as we believe a successful consultant should. A case interview offers you the opportunity to demonstrate your consulting potential. The case format is a simulation in which your interviewer, in the role of client, presents you with a complex business problem and seeks your initial recommendations for...
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...Structure and Pattern of Introduction of Business Related Discipline Research Articles Qing Tian I. Introduction Business and economics papers have made a significant contribution to the development of the corporations and economics growth. However, it may be difficult for the readers to fully understand the materials if the structure of the papers is very complicated. In recent decades, there is an increasing trend in the complicacy of business and economics papers (Ellison, 2000). This phenomenon will induce more complexity in comprehending profound research papers. Regarding it, some basic models have been invented to give a general guideline of the building blocks of the research papers. For example, for writing an introduction of an article, Swales (1990) introduced a rhetorical pattern called create-a-research-space (CARS) which segments the introduction into three major parts, namely move 1, 2 and 3. The move 1 aims to give a background information of the topic of the research paper, depicting a general picture of which area the paper will fall into. The next move known as niche basically serves to connect move 1 and 3, illustrating the motive and inspiration of the paper (Swales & Feak, 2012). Followed by niche is the main purpose of the article. By presenting in either a purposive or descriptive way, the author can show a ultimate goal of the article. However, although some kinds of standardizations have been made to formalize the research papers, the construction...
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...create value for your customer. Course: ISM 13 Module 3 Pricing Authors: Blume, Anna 900711 Collu, Giulia 850511 Tutor & Examiner: Hand in date: 1 Caesar, Peter 15-01-15 Primozone Abstract This paper is aimed at providing a comparison of the total cost of owner ship (TCO) of two comparable products through the tool of a lifecycle cost analysis (LCCA). The compared products are ozone generators from Primozone and Ozonia. Firstly the importance of pricing is presented followed by the discussion of the four most common pricing approaches and the best pricing method according to literature to achieve high margins is introduced. The described topics will be explained in detail in the theoretical framework followed by a comprehensive description of how value based pricing can be put into practice through economic value analysis and quantification and be therefore used as sales arguments based on the LCCA presented in Appendix A. The parameters for the LCCA were chosen with the help of the head of sales of Primozone, Jürgen Bischhaus. The collected data are presented in Chapter 4 and implemented into the excel spreadsheet in Appendix A. Several changing parameter scenarios were applied with the result that Primozone outperforms Ozonia in each of them except energy consumption, which are marginally higher, but not significantly. This also results in the ability for Primozone to charge a higher price compared based on its economic value. In ...
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...Part B: Strategic Management Accounting for Decision making 8 3.1. Shutting down or keeping open a part of a business 9 3.2. Pricing a product or service 10 3.3. Product mix and limiting factor analysis 11 3.4. Make or buy decision 11 4. Conclusion 12 List of References 13 Appendix 01: Discount for early settlement 14 Appendix 02: Factoring 15 Appendix 03: Decision to shut down an operation 16 Appendix 04: Limiting factor and decision making 19 Appendix 05: Make or buy decision 21 1. Introduction This report has been prepared as per the request made by you to prepare a report on working capital management and using strategic management accounting techniques in decision making. This report has been divided into two parts, part A deals with working capital management and the components of working capital such as trade receivables, inventories, cash and cash equivalent and trade payables. This part also analyse the strategies to improve each component of working capital to improve overall working capital of XYZ and the impact of those strategies on connected stakeholders such as trade receivables and payables of XYZ. The part B describes about the usage of strategic management accounting techniques on strategic and tactic decisions such as shutting down an operation, pricing a product, decisions on product mix based on limiting factors and make or buy a component. This part also...
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