ZIMSEC O Level Business Studies Notes: Marketing: Customer oriented pricing
- This is pricing based on the demand for the product and customer’s perceptions of the product’s value
- Various techniques are used
- Perceived value pricing- is where the price is chosen to position the product in the market
- A price is chosen which is consistent with the image of the product
What is customer based pricing?
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How does customer information influence pricing strategies?
Segmented Pricing
- Customer Segment Pricing. Different prices are charged for the same set of products or services from different customers In case of customer segment pricing.
- Location Pricing. A brand charges different prices for products or services at different locations under location pricing.
- Time Pricing. ...
What is consumer based pricing?
Consumer-based pricing, like consumer insight, is built around consumers who have a strong interest in a product category. Specifically, pricing is set with regard to how much these consumers would be willing to pay for a particular product. Far too often sports product companies do not include the consumer in their pricing.
What is value oriented pricing?
Value-based pricing is a strategy of setting prices primarily based on a consumer's perceived value of the product or service in question. Value pricing is customer-focused pricing, meaning ...
What is customer oriented pricing in marketing?
Key Takeaways. Customer-driven pricing is a pricing strategy in which a company sets prices according to customers' perceived value of its products and services. To be effective, companies should consider how to best segment the market so that prices reflect those segments perceptions of value.
What is an example of customer-driven pricing?
If the cord of firewood costs the logger $100 to cut and deliver, in the heat of summer, maybe the customer-driven pricing number is $120. In the middle of winter, when people are desperate, maybe the "right" price is $200. Those customers then drive the price of the logs.
What is price oriented?
Also known as a competition-based strategy, market-oriented pricing compares similar products being offered on the market. Then, the seller sets the price higher or lower than their competitors depending on how well their own product matches up.
What is competitor oriented pricing?
a method of pricing in which a manufacturer's price is determined more by the price of a similar product sold by a powerful competitor than by considerations of consumer demand and cost of production; also referred to as Competition-Based Pricing.
What does it mean to be customer oriented?
Customer orientation is a business approach that puts the needs of the customer over the needs of the business. Customer-oriented companies understand that the business won't thrive unless it consistently improves customer focus. It's a way of thinking that aligns your business goals with your customers' goals.
What is the advantage of customer driven pricing?
It increases focus on customer services Customer-centric pricing is for the benefit of customer satisfaction. This also helps you improve customer service and provide an unparalleled customer experience.
What are the 4 types of pricing?
There are 4 Pricing Methods that can help you put a price on what you sell: replacement cost, market comparison, discounted cash flow/net present value, and value comparison.
What are the 4 types of pricing methods?
Major Product Pricing Methods There are many different pricing strategies, but Competitive Pricing, Cost-plus Pricing, Markup Pricing and Demand Pricing are four common methods for small business owners to use.
What is profit oriented pricing?
What are profit-oriented pricing objectives? A profit-oriented pricing objective means that a company seeks to earn maximum profit with every sale or service provided, and achieve long-term business profitability.
Who uses demand oriented pricing?
The airline industry offers one of the most prominent, everyday examples of demand-based pricing. Flight prices fluctuate based on factors like timing and seasonality. For instance, airlines typically charge higher prices for tickets to Las Vegas on New Year's Eve than they do during most other times of the year.
Which of the following is an example of competition oriented pricing approach?
A classic example of a competitor-based pricing strategy is between Pepsi and Coca Cola. Both brands compete against each other over pricing, quality and features, and their prices remain similar, although Pepsi is slightly cheaper than Coke on average.
What is competitive oriented?
When a business is competitively oriented, it constant reassesses its strengths and weaknesses relative to its competitors. A performance evaluation may include production efficiency, pricing, delivery times, customer satisfaction, innovation, employee retention and market share.
What is custom pricing?
Customary pricing is a pricing method where the price of a good or service is based on consumers' collective perception of its value. It's typically used for a product or service that has a consistent market history being sold around a specific price point — one that ultimately dictates how much it should cost.
Why do we use customary price?
You can also use a customary price as a reference point to help you create the impression of value.
Is there a standard for what a candy bar is worth?
That would be impossible. There isn't any sort of definitive standard for what a candy bar is actually worth, but given how they've been valued historically, there's a popular perception for how much they should cost — and retailers generally price them on that basis.
Is customary pricing reasonable?
It's essentially impossible for newer products' and services' prices to be considered customary. Generally, determining those prices means going through some trial and error before the public can definitively land on what they consider to be reasonable. There are a variety of examples of customary pricing available.
What is customer orientation?
Customer orientation is an approach to running a business that prioritizes customers and their needs over those of the business. The goal of customer-oriented companies is to satisfy customer’s needs to retain them for longer. Customer orientation also helps companies attract customers to their offer naturally.
Customer orientation: examples from top companies
Nordstrom’s tire return allegedly happened in the 70s. The story definitely supports the retailer’s brand known for its exceptional customer service. But how would Nordstrom play it out if someone tried it in the 21st century?
How to implement customer orientation?
How did you feel reading about all those fantastic examples of customer orientation marketing in actual organizations?
Customer orientation skills
Finally, customer orientation is only possible to achieve if your organization fosters the right skills. Here’s a selection of abilities you can master yourself or develop in employees and managers to build a truly customer-oriented culture.
Key things to remember
Adopting a customer-oriented business model is an essential piece of the puzzle to succeed in the competitive marketplace. Here are the main points to remember:
What is customer value based pricing?
So what’s the definition of customer value-based pricing? Customer value-based pricing uses buyers’ perceptions of value (not the seller’s cost!) as the key to pricing. Customer value-based pricing is setting price based on buyers’ perceptions of value. Therefore, the marketer cannot design a product and marketing programme and afterwards set the price. Instead, price is an integral part of the marketing mix – it is determined before the marketing programme is set.
What is good value pricing?
Good-value pricing is the first customer value-based pricing strategy. It refers to offering the right combination of quality and good service at a fair price – fair in terms of the relation between price and delivered customer value. Good-value pricing is mainly used for less-expensive products, for instance for less-expensive versions of established, brand-name products. To give an example, take a look at McDonald’s 1€ menu items. Likewise, every car company offers small, inexpensive models better suited to the strapped consumer’s budget. Even companies such as Ryanair can be considered to rely on good-value pricing. Granted, they offer much less value – but at even lower prices. Passengers flying the low-cost airlines won’t get much value, but pay a price matching that value.
What is value added pricing?
Value-added pricing, an alternative customer value-based pricing strategy, means attaching value-added features and services to differentiate the product and charging higher prices. In other words, you add features and thereby customer value – and in return you charge more for the value-added product. Therefore, value- added pricing does not aim at cutting prices to match competitors, but attaching value-added features to differentiate the products from competitors’ offers. The added value justifies a higher price in customers’ eyes.
What is customer orientation?
Essentially, it means observing the wishes and needs of the customer, anticipating them and then acting accordingly.
Why is customer orientation important?
Customer orientation is essential for achieving customer satisfaction. Insight into the expectations and satisfaction of customers enables your organisation to improve customer orientation. Monitoring customer satisfaction produces important information that makes it possible to keep an eye on and improve processes.
Why is it important to create a product that is experienced as unique?
Create a product that is experienced as unique. It is important for customers to feel as if they are special and that everything is tailor-made for them. They want to be helped when it is convenient for them. They want to be treated well, to have the impression they are being looked after. If an organisation responds to this, the customer will have the impression that the organisation is always ready and waiting to serve them. 5
Should employees give customer orientation?
Employees should give customer orientation an increasingly high priority. In the past, customers often waited until they were approached by a 'sales person'. They had a list of other offers to keep prices and service competitive, but that was more a formality than anything else.
What is profit oriented pricing?
A profit-oriented pricing strategy involves setting prices for your products that will guarantee you'll make money on each sale. While profits are the goal of any business, setting prices based on profit goals can present some problems for your business.
What is pricing strategy?
Pricing strategy refers to method companies use to price their products or services. Almost all companies, large or small, base the price of their products and services on production, labor and advertising expenses and then add on a certain percentage so they can make a profit.
What is competition oriented pricing?
Competition-oriented pricing, also known as market-oriented pricing, means basing the prices of your products or services on those of the competition rather than considering consumer demand and your own costs. This pricing method also involves analyzing and researching your target market.
When you use a competition-oriented pricing strategy, do you set your prices based on those of your competitors?
When you use a competition-oriented pricing strategy, you set your prices based on those of your competitors. You'll also take into account your business goals and how the difference between competitors' prices and your own will appear to customers. You may choose to set prices higher than those of competitors if:
Why is pricing products so low?
Disadvantages: Pricing products too low can hurt profits if your revenue doesn't cover production costs or other expenses. When you and a nearby competitor price products too closely, you need other marketing tactics to attract customers, which may cut into profits.
How to maintain competitive pricing?
This allows you to: 1 Maintain competitive prices 2 Avoid changing and updating prices in your point-of-sale system 3 Continue selling at a higher price to consumers who aren't aware of a competitor's offer
What is pricing strategy?
Pricing as a Marketing Strategy. Price is one factor in your business's marketing mix. It is one of the first things that consumers are going to associate with your business, particularly when they compare you to competitors.
Why do you want to market your business as high end?
You want to market your business as high-end or exclusive. You want to indicate that your products are of better quality than competitors' products. Or, you may choose to price your products lower than the competition if: You want to appear more affordable than competitors. You want to draw in customers based on price alone.
Does pricing affect bottom line?
Pricing doesn't just impact your bottom line ; it can also change the marketing tactics you need to attract customers and maintain an advantage in your market. If competition-oriented pricing isn't right for your business or your risk tolerance, there are other pricing methods you can use.
What is market based pricing?
Market-based pricing is when prices are set according to current market prices for the same or similar products. When done right, a market based pricing strategy allows a business to set prices higher when a product is initially introduced, and later on align prices with market prices to remain competitive while increasing profitability.
Why is penetration pricing fixed?
When a product is introduced into market conditions for the first time, its penetration pricing can be fixed due to little or no existing competition in the target market. This means that companies that are first to market are able to go about setting prices in the beginning.
What happens if competitors make a mistake in pricing?
If they make a mistake in their pricing, it’s rather likely you will too. Competitor pricing has a certain stability toward it, but it’s extremely local and can lead to short-term thinking, as well as plenty of lost opportunities when it comes to expanding your customer base.
What is another example of a saturated industry?
Another example is the car industry . A highly competitive and saturated industry where market-based pricing is very prevalent. Just take a look at the pricing of the latest Honda and Toyota models, they’re virtually the same.
What happens if you mirror your competitor's pricing?
If you mirror your competitor’s pricing, you’re also likely to acquire the same customer base, rather than create your own. Another negative, and crucial one, is that you’re not thinking about the customer. Your end user should be considered from the very beginning.
Is market based pricing a standard industry?
Depending on the industry your organization is a part of, market-based pricing is pretty simple and can be rather prevalent. There is no standard industry average but if you’re in an industry with even one or two direct competitors you can implement a reasonable market-based pricing strategy.
Is market based pricing accurate?
Obviously, if that industry is particularly saturated, market-based pricing is likely to give you an accurate pricing point that will allow you to remain competitive. But you will need to focus on adding superior value compared to your competitors. It’s also fairly low risk.
What is cost based pricing?
Thus the Cost-based pricing can be referred to as the pricing method that calculates the product’s price by firstly calculating the cost of the product in which the desired profit is added, and the result is the final selling price.
What is markup pricing?
It refers to a pricing method in which the fixed amount or percentage of the cost of the product is added to the product’s price to get the selling price of the product. Markup pricing is more common in retailing in which a retailer sells the product to earn a profit.

Customer Value – Key in Customer Value-Based Pricing
Definition of Customer Value-Based Pricing
- So what’s the definition of customer value-based pricing? Customer value-based pricing uses buyers’ perceptions of value (not the seller’s cost!) as the key to pricing. Customer value-based pricing is setting price based on buyers’ perceptions of value.Therefore, the marketer cannot design a product and marketing programme and afterwards set the pr...
The Process of Customer Value-Based Pricing
- In customer value-based pricing, the company first assesses customer needs and value perceptions. After that, it sets a target price, based entirely on customer perceptions of value. The targeted value and price will then drive decisions about what costs the firm can incur, as well as about the resulting product design. The customer value-based pricing process is illustrated below.
Measuring Customer Value – The Difficulty in Customer Value-Based Pricing
- Certainly, measuring the value customers will attach to a product is not a simple task. Well, calculating the cost of ingredients in a meal is relatively easy. But assigning values to other satisfactions such as taste, environment, relaxation, conversation and status is quite challenging. The reason is that these values are subjective: they vary both for different situations and for diff…
Good-Value Pricing – Customer Value-Based Pricing
- Good-value pricing is the first customer value-based pricing strategy. It refers to offering the right combination of quality and good service at a fair price – fair in terms of the relation between price and delivered customer value. Good-value pricing is mainly used for less-expensive products, for instance for less-expensive versions of established, brand-name products. To give an example, t…
Value-Added Pricing – Customer Value-Based Pricing
- Value-added pricing, an alternative customer value-based pricing strategy, means attaching value-added features and services to differentiate the product and charging higher prices. In other words, you add features and thereby customer value – and in return you charge more for the value-added product. Therefore, value-added pricing does not aim at cutting prices to match co…