This video gave a great overview on the importance of pricing and how it closely relates to marketing. In the video, Mr. McCarthy emphasizes that good businesses successful when they obtain strong pricing power. In order to become profitable, a business must execute smart par icing methods and executions. What mainly stood out to me was that business with weak pricing executions usually tend to offer discounts, special offers and promotions, or give away free products without understanding the right price for what they are trying to sell. In order to implement proper pricing, the business must understand and monitor the competition, evaluate the cost of production, and observe the price based on the value to the customer. By observing these key elements, the business can price their products or services properly to ensure a successful profit.
Thank Brian K. McCarthy for such an explanatory video. Your exposure really helps to clarify the pricing process in the market. The price is one of the most important aspects to consider in an exchange. You can launch your business or you can break it. I work in the Real Estate business, generally, the most used price method to list a property is the price of the competition, we make comparables of properties in the area, with similar characteristics that were sold in the last six months or are active at the moment. Once the property is listed, the value-based customer will play its role, where the buyer decides to put an offer in consideration of what he believes the property is worth. In new construction properties, the three pricing methods are taken into account, the cost focused, being based on the price of construction cost, the competition focused and customer value-based pricing.
McCarthy did a great job explaining the details of pricing and how to develop an effective pricing strategy. It should be noted that pricing involves Cost Focused, Competition focused AND Customer value focused efforts. It takes a village and efforts of the company as a whole to develop and justify pricing. While customer value information is hard to discern it is extremely important that sales staff is properly trained to communicate differentiations and benefits. Also important to keep in mind that we want to create and build demand but also be able to sustain it. High profits attract competitors and the business should be prepared to satisfy demand in a positive way to stay above competition.
The most important piece of information presented in this video is how relative pricing is to marketing, and how much pricing can impact most aspects of business. The statement discussed by Adam Smith is what I feel impacts me most in my professional life. We constantly need to consider that pricing is more than the monetary value we place on a product, and we must consider the impact acquiring it will have on our customers. This is why e-commerce has taken on such popularity today, as it is the easiest way for consumers to obtain what they want and need. This eliminates their perceived hassle of driving to a store, waiting in lines, and having to have interactions prior to a purchase. For retailers with physical locations, such as the one I operate, we need to facilite transactions for those who prefer quick and less invasive retail interactions when purchasing a new product or service. This is why incorporating online pickups among other concepts into retail stores can help to ensure consistent traffic, and retaining some sales that might be lost to online sales. Another portion of this video discusses customer-value based pricing. This is important because it is about focusing on the customer needs and the benefits of the product, and it is all based on how much the customer believes the product should cost. This is the pricing method used in my current business, and I think it is important to keep in mind that you must always ensure that your product meets the needs. This helps to both acquire new sales, and retain current sales and accounts.
This great video explained pricing. Most people think that price is simple. It is just the price the company set for the product or service. The decision of price is more complicated than that. As marketers, we need to pay very close attention to the decision of the price. It is not only what we want to receive for that product. It is our cost plus the competition price plus the value our product has to the customers. Setting the price right can have a very important impact on our profitability.
This video gives a great explanation on how to set price for a specific product or service. After watching this video, I have a better understanding on the aspects and factors that need to be considered when setting a price. One of topics that attracted my attention was the Cost Competition. Sometimes, we think that we can disrupt an industry or market just by providing the same quality for less. However, this might not be the best approach because we will get into a price war like it was mentioned in the video. If you are a start up business, that is the last thing that you want to see happening since you do not have a recognized brand and the only factor that triggers your consumers is price. Moreover, your competitors (with a established brand) with more resources will be able to drop their prices even more and gain competitive advantage over your organization.
Value-based pricing is a really interesting concept used by many marketers. I found a great definition of it when reading an article "Value-based pricing is the method of setting a price by which a company calculates and tries to earn the differentiated worth of its product for a particular customer segment when compared to its competitor.”' Tying this McCarthy's video, companies have a great opportunity to make money through value-based pricing - here are some steps: 1. Refer to a specific segment of the market 2. Understand the segment's "next better alternative" from competitors (essential point of comparison when calculating value-based pricing) 3. Differentiate the brand (what's our added-value?) and 4. Place a dollar amount on the differentiation. Because customer value info is sometimes hard to discern, it is important to base this process our segment's next best alternative (if our product was not available on the market) and on our product added-value (what makes it better?).
This video is extremely useful to me and my business, especially at this moment in time. Selling premium luxury leather goods is very dependent on pricing, especially in the market we are currently in. Our main market in the Caribbean is a very brand loyal market and are willing to pay premium prices for our premium goods. However, now that we are expanding in the the US, we need to carefully set our prices to make sure it sets us up for success and allows us to correctly position ourselves in a new market. This video did a great job of opening my eyes to that and showing me that it is crucial that the prices of our goods are set correctly from the get go. Many companies have failed before even starting thanks to overlooking how important it is to price your product correctly.
Great video on pricing from Brian McCarthy. He’s right! Pricing is at the core of all marketing elements that can make or break a business. I would like to highlight the fact that having due diligence and being aware of your industry’s competitive intelligence is critical to set your pricing. With regards to real estate, yes you need to know your products and services inside out. While you need to know industry information, it is still crucial that you are aware of your competitors and how their market practices. Over the years, I have seen many investors sacrifice on integrity for the right price. This is something I am not willing to entertain. While I provide real estate and property management services for many investors, I will not cut corners or jeopardize my license to serve their greedy interests. With this, I have had many challenges formulating my fee schedules with and maintaining fairness and integrity among all my transactions. Logistically, I have to look at my interest returns as a basis for setting pricing. But at the end of the day, investors want to go with where they are getting the best services for the best price. Every case is different, but in the end, I always try to do my best by people.
This is a very informative and useful video. Mr. Brian McCarthy stated that a price could either help a business succeed or it could break the business. You have to take a lot of different factors into consideration before putting a price into a product or service. When I started my business back in 2012, one of my main issues was figuring out which cost method I was going to use. I wasn’t sure if I should choose the “Cost Focused” or “Competition Focused” or “Customer value-based Pricing” method. What I decided to do is ask potential clients what value did these products bring to them specifically. The second step that I did was purchased similar products from the competition directly. Finally, when I was ready to sell my products, I took into consideration all three methods and came up with a price that would make the most sense to my potential clients based on the value my product would bring to the client and also a price that was not far from the competitions. Even though my product was of better quality, my consumers were price sensitive.
This video does a good job of explaining the importance of pricing for an company and how marketers influence the process. I agree in that the focus of pricing should encompass all three methods, cost, competition and customer value in order to have the most effective price execution. A key message in this video is that of the importance of clearly communicating the differentiation of the products and benefits to employees and properly train the sales and marketing teams. If this not done effectively it can hinder the outcome which is profitability and higher revenue.
The video has been very helpful in explaining the different pricing strategies that companies use to price their products. At my current job, we have predetermined prices for all the products we sell, but sometimes the sales people give special pricing for their customers based on the relationship they have with them. They want to make sure that the customers are happy while at the same time generating profits for our company. Sometimes the sales people at my company give special pricing to compensate any difficulties or issues our customers had experienced in the past, and sometimes they give special pricing for being new customers, depending on who the customer is. This falls within the Customer Valued Based Pricing.
Great and very instructive video which provides useful solutions to design the best pricing strategies; this became extremely beneficial for my current job position in the dairy food industry. Working with customers from different countries needs to take into consideration diverse elements in terms of setting a pricing list, like agreeing the price per container, or volume purchased. We use the three methods presented in the video: cost focused, competition focused, and customer value - based price. But, we always try to provide our customers with the best options to build long term relationships. This video is valuable to understand the process of determinate the right pricing methods and execution that it fits our company, and at the same time build customer value.
Watching this video really changed the way I looked at pricing. In this video, I learned how important pricing is and how determining a price doesn’t really mean this will be the set price of the product, since there are a lot of aspects or noise to keep into consideration at the time of execution. As part-owner of a small family business in the Dominican Republic, I never really understood the different options of methods available to set the proper price for our services. We always based ourselves on the competition and what other people where offering out there. One thing I would be taking into consideration from now and on whenever we’re setting prices and developing future pricing strategies is to focus on setting pricing methods that make sense to my industry - understanding the cost, monitoring competition, and recognizing the importance of a price based on the value of the customer. Moreover, I would be focusing on having a strong price execution as we go to the market - having someone who would understand the importance of price and how to properly introduce the profit equation and help to set the right standards based on my company’s values, communicate differentiation and benefits of my services, and invest in training for my personnel. Thank you, professor McCarthy, for summarizing and synthesizing these terms for easier and faster comprehension of the topic. Great video!
Mr. McCarthy presented a very thorough and comprehensive outline for how pricing relates to marketing and how you can position your marketing campaign towards success by practicing profitable, competitive prices. The industry that first came to mind was fashion retail. With 4 years of in-store experience and 1 year of corporate experience, I understand the importance of meticulously following effective pricing strategies. From a top-down perspective, a business can decide on a price for a product, but how it travels from the corporate, district, local, and store levels is crucial to executing the pricing technique. I am a firm believer, more employers need to seek the suggestions and recommendations of their sales managers and associates to creating effective pricing strategies for their brand. As a manager or associate, you are working closely and intimately with a client on shopping decisions that weigh very heavily on their satisfaction levels. Additionally, because many customers practice comparative shopping, they can determine what they'll pay for a product fairly quickly because they have done research. What Mr. McCarthy failed to mention is how a marketer can intercede and interrupt the pricing strategy sessions in the business? This question may sound simple, but in my experience in corporate, the pipeline of communication isn't clear or easy to navigate. Who makes the final pricing decisions? The marketer? The wholesale eecutive? The sales director?
Pricing is a new concept for me. In my current job, we don't have to determine a price of products. We have set membership prices that don't typically increase. This video helped me understand how to efficiently determine how to set prices. The price can raise or lower profitability by 50% was very interesting to me. The price means everything to a consumer and if you think about it, when we go to a store that's almost the first thing you look at and that helps you determine if to purchase or not. Marketing is such a broad area and this course has helped me realize how many things to take into consideration when it comes to the consumer. Pricing is one thing I didn't really think about, you would think that this would be determined by the financing department but this helped me realize that pricing is a huge process in the sale of a product or service.
The video is informative and accurate. Since I started my first steps in marketing my first manager told me that pricing plays a critical role in decision-making as well as building an image for the company. In my own company, I decided to focus on small business and entrepreneurs. Thus, the decision then lies with my company, or whether I want to target the premium customers or the volume customers - And this decision can be made by managing my pricing strategy, hence, I set my pricing to fit my clients and my target market. I truly do believe that pricing strategy is one of the most important P in the marketing mix and its importance is increasing with the increase of products and services worldwide.
After this video, you will gain an understanding of the pricing method and the pricing execution. I no understand that pricing method help a company determines the price it will go to market with. A company must focus on the cost of producing the product or service, price of competition, and customer value. Now I now the effective formula to set price. Thank you for sharing.
This video was really helpful in understanding pricing methods and execution. I personally have no experience in pricing decisions nor go-to-market pricing strategy. This video explained in a simple and effective manner what you should cover on pricing in order to succeed. Pricing is a critical element that if we don’t manage it well could ruin the entire business. From this video, you can see that external elements like, competitors and consumer perception, are as important as internal values like your costs and contribution margin goal. Many factors to think of before setting the final price. Many elements I mentioned above plus remembering that your competitors are on your heels, the consumer value- based and other external factors (trends/insights/seasonality), that you should consider as well before setting the price.
I have previously worked in marketing departments as well as design departments in companies, and haven't really been around numbers and pricing. This video helped me understand better the pricing process, from revenue, costs and profits. I believe every marketing department should be aware of the company’s numbers and pricing, because they may be used as leverage in strategies depending on them.
There are multiple take aways from Brian McCarthy's pricing video. He mentions how relevant it is to consider both pricing methods and pricing executions when it comes to setting the right price for your item. This information is very influential and inspiring for someone within the marketing or sales realm. Many people, and I include myself, have found this procedure of setting the right price for an item or service quite difficult, but Brian presents us three different pricing methods and explains executions that will give that pricing a reasoning. The way this is influential is because it will reset your mind and helps you understand that its important to price for value and to be ready to sell with a strong price execution.
Pricing is a critical part of the profit equation. Pricing itself can either lower or raise profits by significant margins that can affect a business. The key points of pricing methods and execution are crucial because one, it determines the market prices and two, the ability to price. I think these two key factors are critical because it shows the business is focused on not just beating the competition but valuing its customers. Furthermore, the execution allows for that further research on current and future customers. This is because as a business, you want to be aware why your price can communicate a differentiation between another competitive company and highlight the benefits for a higher prices or even lower ones.
This video has definitely influenced me to change my approach to pricing within my photography business. Thank you for breaking down pricing the way you did and clearly identifying the two key considerations in deciding pricing; methods and execution. I realized that I have only considered my expenses and customers without considering my competition. The fact that you shared that, “studies have shown that small variations in price can raise or lower profitability by very significant margins” was alarming and really has encouraged me to spend more time researching so that I can perhaps introduce new pricing for this upcoming year. Value pricing and strong execution here I come!
It is easy to think that the right thing to do as a brand, is to bring up the price for immediate profitability. I like the way Brian mentions that the price can be a great way to either increase profitability or ruin your business. It really makes you realize that you cannot just carelessly increase your price as a quick fix. The pricing methods discussed together seem like a sound strategy that, along with the Pricing execution, could lead to a healthy profitable price for a product. I agree that there needs to be a focus on market research, an eye on the competitor costs as well as keeping that return on investment in mind. I tend to focus just on the ROI and the fixed cost and fail to see the competitor pricing or the customer value. This will be something that I pay more attention to.
This was a great video. This puts of my pricing questions into perspective. I have always wondered how the price of an item was determined. Now I know, there are pricing method and pricing execution to accomplish things. Understanding how the pricing method entails cost, competition, and customer value makes total sense, and will help me in the future when put in situations involving price.
This video introduces marketing perspectives that many people tend to overlook. Often at times, people think marketing is all about advertising and making sales, however, a major role that marketing plays in the business world is knowing how to effectively price your product on the market. As quoted in the video by Warren Buffett, “the single most important decision in evaluating a business is pricing power.” If marketers do not take this concept into consideration, their other marketing strategies, advertising and sales, will turn out to be ineffective. "Pricing is a critical part of the profit equation,” in getting the price right, specifically for your target audience, impacts the profitability for your business. It’s imperative to know the two key considerations that were covered in the video: pricing method and pricing execution. The pricing method refers to how a company determines its go-to-market prices while the pricing execution refers to a company’s ability to actually get the price it sets. Using these concepts as a “rule of thumb” gives more insight on what is important when setting a price. We must know the appropriate price range to set for specific products and must also take into consideration whether that set price will boost the overall profit for our business.
This short video provides crucial information about pricing. As a matter of fact, I think that the way businesses set their prices needs to be evaluated carefully, as it can have consequences. Basically, businesses charge their customers for the consumption of the product and the value that they get from the service. In my opinion, businesses need to understand how pricing affects their models, so they can better select their prices. Pricing does not only play a crucial role in the decision making of businesses but also helps on building either a positive or negative image towards them. In that sense, I think that the customers and the competition need to be taken into account to know what prices the business will set.
This video presents a clear and simple overview of price and pricing methods. As marketers is vital to take into consideration how the correct pricing method can affect the profit equation - as explained by McCarthy. Particularly interesting, the customer value-based pricing as it reflects the value of the product/service from the customer’s perspective and level of affordability. Although, this pricing is primarily set per the customer’ s perceived value of the product, is important to segment the market as part of the pricing execution; this would allow engaging with different types of customers/consumers as the prices would reflect these variations. This goes aligned with the fact that an organization/company must have a comprehensive understanding of the costs and monitor competition to use their pricing as another path to differentiation. Thank you!
I was not aware of the importance of pricing. I enjoyed watching this video, as it was very detailed in explaining pricing. It was interesting to earn that pricing is the fastest way to increase profitability with in a company, and it is the fastest way to ruin a business. When I first thought of pricing, I thought of just adding a value to a certain product or service in regards to certain quality. A company should carefully consider all variations within their pricing methods in order to raise their profit. They should also pay close attention to small details and ensure they understand the best pricing method that fits the company. An interesting fact found in the video was that companies could actually price products and services based on customer value. This helps companies focus on customer needs, the benefits produced by products or services, creating value and increases customers’ willingness to pay for the actual product or service. If I had an organization, I believe this would be a great method to price products and services because it would require extensive research on the target market and would create opportunities to build strong rapports with customers. The only two problems I would potentially face while using this method would be collecting all the information needed on customers and if successful, the increasing profit could open doors for new competition within the market and industry.
This information is very powerful in an environment where everything is becoming a commodity. In today's environment, driving efficiencies in price is playing a very critical role in winning business and remaining competitive. However, the downside is that it is disrupting many industries and companies. Of particular importance, is the concept described as pricing for "customer value". If you are able to articulate the value correctly, you can then, position your product more effectively and more importantly, speak your customer's language. You need to know how the market is pricing, how your competitors are pricing, what your prospect/target is buying, what your contribution margin is in order to craft this "customer value" pricing approach. You need data. Your need to gather specific data to craft your approach, your go-to-market pricing strategy. You can definitely grow the value of each unit by taking this approach and in turn, you can definitely grow your profits.
I really like the video. It made me realize how important is to understand the customer value-based pricing decision. When we focus on costs and competition to set the price we might end up lowering a lot the product's price in order to sell faster. Customers could distrust the product because the price looks too good to be true.Very attractive prices, in some cultures, raise suspicions. Having in mind the customer's mentality can help finding the "perfect" price as well.
Thank you for this video. I wasn't clear on how to approach pricing before but this got me off to a good start. One concept that stuck out to me is the chance that your competitor may react to you undermining its price point. While I'm willing to beat out the competition and forfeit a percentage of my profits to gain customers, I hadn't considered that my actions may trigger a response. Where does product value come in in regards to pricing? Making a product too affordable could, in some ways, devalue the brand correct? Thank you.
Great video! The first approach really connects with me as I can use the customer value-based method in the industry I work, which is advertising. I strongly believe that this is the most suitable method for an agency like the one I used to work where offers customized and personalized solutions to each client.
Mr. McCarthy, this video provides very good and interesting information. Pricing is a very critical component in a business. Your statement that studies have shown that small variations in price can raise or lower profitability as much as 50% is remarkable. It highlights the importance of pricing showing why we must be very careful in pricing method. I think a lot of companies do check the competition's pricing and don’t see the negative customer value or price war profitability their strategy includes. While watching this video, I thought of the ongoing fight between Amazon and Walmart. Amazon will reduce prices based on competitor pricing and Walmart will make sure their customers know that they will match any price from competitive vendors on printed flyers or website. Amazon is making it difficult for Walmart, or any company to compete. It’s frustrating as a customer because as I ask myself - is this competitive pricing affecting our service quality? How do we even know if the prices are reasonable or justifiable?
Great video, pricing is complex and this video makes it straightforward. Consumers nowadays can do price comparisons with the just a few taps on their phones in seconds. Where I work we use perceived-value pricing because of the reputation of our brand that allows to charge a premium. I work in a Caterpillar dealer and we charge a premium because of the value we offer with our products. The workmanship and quality of Caterpillar products has built a lot of brand equity, however due to increase in competition we're moving to value pricing.
Written text of your comment: Many companies utilize various methods of pricing for their products and services. However, it is up to its discretion, which options to execute. High-end department stores such as Bloomingdales, Neiman Marcus, Nordstrom, and Saks Fifth Avenue sell designer merchandise for an extreme amount of money without being mindful of using strategic tools, yet instead, they execute a cost-focused method to achieve ROI, considering the conduction of a wholesale transaction. Its focus embodies on export trade and taxes. Although consumers are willing to pay X amount of money for a bag because of its name, it is not equivalent to customer value method with a strong pricing execution. Today, retailers are therefore struggling to generate substantial revenue due to consumers self-conscious price awareness; they tend to search for lower prices and sales deals. Therefore, when it comes to price placement, we need to be aware of implying both a strong pricing execution for it to become achievable.
I really like the idea of a customer value-based pricing and I think it’s an approach that, if done well, can create great revenue for a company. Smaller and medium-size businesses may not have the resources necessary to conduct all the data that will allow for this kind of pricing approach, so they will more than likely turn to the competition or cost methods instead. I agree with Mr. McCarthy in that the best idea is to use a combination of all three. Any company will automatically have the cost of their goods or services, so it’s a matter of doing some research on competitors and gathering data from customers. For small businesses that may not have the resources to conduct research, there are tools out there that can provide some insight as to how their product or service is doing such as customer reviews (Yelp, Google reviews), the only downside to this is that this is done once the product is in the market, and a company would have to adjust their pricing post-launch.
Before this video, I hadn’t really considered the aspect of matching or competing with competitors. I was only focused on my belief in my future business and the costs involved, not factoring in the effect that other similar business may have. Their prices and promotion can effect my own business success, because often customers go with the best pricing, whether or not the quality is better. For example, different grocery stores match prices if you find a cheaper price of the item in common and bring proof. This may seem like a loss by having to reduce the cost, but in the long run, you are keeping business with customers and still getting most of the revenue income intended. The other company may not have as good as a quality as the same product, and therefore they may suffer more loss even though they sell the item at a cheaper cost.
Costumer Value based pricing is a topic I have been exposed to before, mainly in my previous job. I used to work in a gym in my home country, and here they tried to maintain their price based on costumer value. It was hard for the people in the marketing team to know exactly how much each costumer was willing to spend, how much they thought the gym was supposed to be priced at, and many other aspects. Due to this past experience, I have a kind of negative view on costumer value based pricing. But after watching Dr McCarthy’s video I see that it actually is good because it will be better for your relationship with costumer in the long run and the costumer will be most likely to return due to the relationship that has formed.
When discussing cost focused pricing, the concept of the value that customers place on a product not being factored into the actual cost of a product reminded me of distribution approach in a way. With the distribution approach, other factors that impact the product are not factored into the price; with the negative side to cost focused pricing, the actual value that customers place on a product is not factored into the cost. Applying this to my brand, I must consider how much I am expending in creating and marketing my brand. Of course I am going to put my best efforts into marketing myself, but what happens if my audience does not recognize the value of that? They may place a low value on that and will consequently not be willing to pay much for my services. Considering the positive side of cost focused pricing, all of the information that I need in order to set my price is available if I know my cost. I am aware of how much time and energy I expend towards my brand and can therefore set the price accordingly. However, I must remember that the value that I place on my brand may not equate to the value that my audience will place on my brand. Finding this balance and setting my price accordingly is key in ensuring that I am able to make a profit.
This video, by Brian McCarthy, provided information about pricing in marketing and how different pricing methods can help a company determine how they are going to price their product or service. Brian McCarthy spoke about three methods that could be used to make your pricing decisions: cost focused, competition focused, and customer value-based pricing. Of the three, the company that I work for mainly utilizes the “cost focused” method. When determining the prices of the fire extinguishers that we sell, we always take into account our cost to purchase it from a distributor. We take a look at how much we pay for the actual extinguisher, plus the shipping cost to get to our warehouse. Once we have those two factors determined, we make a decision on which price will cover our cost, as well as generate a profit, per extinguisher sold. As mentioned in the video, “small variations in price can raise or lower profitability,” and in my company’s case, this is spot on. Simply raising or decreasing our price by $5.00 has a significant effect on our profit. This is why we try to avoid lowering our prices per extinguisher because our variable costs only keep increasing, as the years go by. If we begin to lower it too much, we risk the chance of low profitability, which decreases our overall revenue. This video ties into our lecture about price change equations and how one can utilize their CM and revenue to analyze how effective or ineffective a price change can be. This was a great video to watch if you wanted a quick review about pricing in the marketing world!
I want to share my personal experience with a commission based job that I had several years ago that can really reflect the different aspects of the power of pricing. This job was a selling job in the cosmetic industry and we (the sells persons) were allowed to determine the price by ourselves in order to increase our commission. With every customer, I had to calculate all the variables discussed in the video in my head over a period of time of about three minutes and present my customer the suitable price. Some of the aspects that crossed my mind in the three-minute speech that I had to know my client was: who is my client? How much does she pay for her current products? How much does my bid need to be in order to make a profit after deducting the promotion that I will offer them to close the deal(price execution)? I think that all of these variables need be taken into consideration when you do your pricing, but the method that leads my decision making was to price high in order to create costumer based value. In simple words, I priced high, although I know she pays much less to make my product a premium product and distinguish it from what she already has.
The perceived value of pricing is the most important aspect of pricing to me, because you can charge a bit more if there's more perceived value. I would always hate my pricing strategy to be solely based on reacting to competitor pricing.
That is exactly what I thought. But as I saw this video and thought about what I have previously learned in marketing classes (marketing masters :)) I think the costumer value based pricing is pretty important. After all, you want to make sure your costumer is happy and willing to return and purchase more things or services from you. With out the costumer you are nothing, so in my opinion costumers are the priority!
I couldn’t agree more, The correct pricing strategy can make or break a business. As a small-business owner, your strategy dictates not only your profit but the way your product is perceived. price is set at the highest level that your target market is willing to pay to find this balance is the most challenging part in every business.
That’s a great point. I also agree that the value-based pricing is by far the best method. In some cases, it’s very difficult to get feedback from customers or do a market research study and therefore it’s tough to put a value on the product or service. There are some really great companies out there that use this type of method to decide on prices.
The most interesting part of the video for me was the pricing methods part, the author explains that there are three different methods: the cost focused, the competitor focused and the customer value based pricing, and although the idea is to use the three of them in our companies to get the best strategy possible, there is always a predominant one and we can see it on our everyday products. An example of a cost focused method would be a restaurant, usually they take the cost of their dishes and multiply it for a factor, to get the final price of the dish. A product with a competitor focused price would be a commodity we get at the supermarket such as toothpaste or detergent, usually this products need to have similar prices in order to compete against each other. Finally the most interesting one for me, and the one capable of delivering the biggest profits would be the customer value based pricing, and we can see it on products such as the Iphone or a new version of Nike shoes, where the cost of manufacture is minimal compared to the price it is sold to the public.
How about in an industry where you have practically zero competition? We make photo matts (custom designs) which you can frame and obviously hang on a wall. That I know of yet in the United States, we do not know of anyone else who is doing the same thing as we are. What should our pricing strategy be based on? We are B2C for now.
Actually, you do have competition... unless its unsubstitutable , you always have competition. Normal picture frames, posters, and even art work are considered competition. Brian's recommendation on value should be number one. How valuable are custom photo matts to your target audience? Is it valuable enough to pay MORE than a similar piece of art work? If so, you have a little leverage to price your product more than the average piece of art work. You then have the challenge of communicating that your product is more valuable than other methods of wall hangings. If I were you I would sit down and brain storm what makes my product more valuable than x,y,z. Then I would figure out who cares about this value? 50% Value Pricing , 25% competition, 25% cost Keep in mind though, if this is intended for a niche market ( It sure sounds like it), then you need great margins to cover for the lack of units sold. This is usually the case for most customization products. Hope this helped!
Hello Christopher,I believe your price should be based on the three price methods. Initially taking into account the cost price to guarantee a return on investment. Second, even if you do not have competitors who are doing exactly the same as yourselves, there are other companies that can choose in a slightly different way to cover the same need of your target market. At that time you should make a broader analysis of your competitors and their products and evaluate their quality in comparison with what you are offering. And lastly, in customer value-based, it will help you to determine how much your customers are willing to pay for your product.
Hello Christopher, I agree with "tsusajop" on the fact that you do have competition and therefore you need to pay special attention to differentiation. That’s a key to success since it would raise brand recognition leading to customer loyalty and it would put you in a better position to increase your prices. A crucial step for achieving differentiation is to know who your target audience is in order to implement the right marketing strategy and a customer value-based pricing. Good luck!
I think that finding a niche that sets you apart from other companies is a major plus. People get excited for new products and become especially loyal when there's only a few places that carry what they need. They feel like what you have is almost as if it were made for them. Even if there are other competitors, the pool for customers isn't as bad because it's a unique market. What sucks is when other companies begin to copy your product and marketing, and you have to continue to be creative an innovative-but that's what we love! It's all about knowing your business and figuring out how to make things work better on every end.
This video gave a great overview on the importance of pricing and how it closely relates to marketing. In the video, Mr. McCarthy emphasizes that good businesses successful when they obtain strong pricing power. In order to become profitable, a business must execute smart par icing methods and executions. What mainly stood out to me was that business with weak pricing executions usually tend to offer discounts, special offers and promotions, or give away free products without understanding the right price for what they are trying to sell. In order to implement proper pricing, the business must understand and monitor the competition, evaluate the cost of production, and observe the price based on the value to the customer. By observing these key elements, the business can price their products or services properly to ensure a successful profit.
Thank Brian K. McCarthy for such an explanatory video. Your exposure really helps to clarify the pricing process in the market. The price is one of the most important aspects to consider in an exchange. You can launch your business or you can break it. I work in the Real Estate business, generally, the most used price method to list a property is the price of the competition, we make comparables of properties in the area, with similar characteristics that were sold in the last six months or are active at the moment. Once the property is listed, the value-based customer will play its role, where the buyer decides to put an offer in consideration of what he believes the property is worth. In new construction properties, the three pricing methods are taken into account, the cost focused, being based on the price of construction cost, the competition focused and customer value-based pricing.
McCarthy did a great job explaining the details of pricing and how to develop an effective pricing strategy. It should be noted that pricing involves Cost Focused, Competition focused AND Customer value focused efforts. It takes a village and efforts of the company as a whole to develop and justify pricing. While customer value information is hard to discern it is extremely important that sales staff is properly trained to communicate differentiations and benefits. Also important to keep in mind that we want to create and build demand but also be able to sustain it. High profits attract competitors and the business should be prepared to satisfy demand in a positive way to stay above competition.
The most important piece of information presented in this video is how relative pricing is to marketing, and how much pricing can impact most aspects of business. The statement discussed by Adam Smith is what I feel impacts me most in my professional life. We constantly need to consider that pricing is more than the monetary value we place on a product, and we must consider the impact acquiring it will have on our customers. This is why e-commerce has taken on such popularity today, as it is the easiest way for consumers to obtain what they want and need. This eliminates their perceived hassle of driving to a store, waiting in lines, and having to have interactions prior to a purchase. For retailers with physical locations, such as the one I operate, we need to facilite transactions for those who prefer quick and less invasive retail interactions when purchasing a new product or service. This is why incorporating online pickups among other concepts into retail stores can help to ensure consistent traffic, and retaining some sales that might be lost to online sales.
Another portion of this video discusses customer-value based pricing. This is important because it is about focusing on the customer needs and the benefits of the product, and it is all based on how much the customer believes the product should cost. This is the pricing method used in my current business, and I think it is important to keep in mind that you must always ensure that your product meets the needs. This helps to both acquire new sales, and retain current sales and accounts.
This great video explained pricing. Most people think that price is simple. It is just the price the company set for the product or service. The decision of price is more complicated than that. As marketers, we need to pay very close attention to the decision of the price. It is not only what we want to receive for that product. It is our cost plus the competition price plus the value our product has to the customers. Setting the price right can have a very important impact on our profitability.
This video gives a great explanation on how to set price for a specific product or service. After watching this video, I have a better understanding on the aspects and factors that need to be considered when setting a price. One of topics that attracted my attention was the Cost Competition. Sometimes, we think that we can disrupt an industry or market just by providing the same quality for less. However, this might not be the best approach because we will get into a price war like it was mentioned in the video. If you are a start up business, that is the last thing that you want to see happening since you do not have a recognized brand and the only factor that triggers your consumers is price. Moreover, your competitors (with a established brand) with more resources will be able to drop their prices even more and gain competitive advantage over your organization.
Value-based pricing is a really interesting concept used by many marketers. I found a great definition of it when reading an article "Value-based pricing is the method of setting a price by which a company calculates and tries to earn the differentiated worth of its product for a particular customer segment when compared to its competitor.”' Tying this McCarthy's video, companies have a great opportunity to make money through value-based pricing - here are some steps: 1. Refer to a specific segment of the market 2. Understand the segment's "next better alternative" from competitors (essential point of comparison when calculating value-based pricing) 3. Differentiate the brand (what's our added-value?) and 4. Place a dollar amount on the differentiation. Because customer value info is sometimes hard to discern, it is important to base this process our segment's next best alternative (if our product was not available on the market) and on our product added-value (what makes it better?).
This video is extremely useful to me and my business, especially at this moment in time. Selling premium luxury leather goods is very dependent on pricing, especially in the market we are currently in. Our main market in the Caribbean is a very brand loyal market and are willing to pay premium prices for our premium goods. However, now that we are expanding in the the US, we need to carefully set our prices to make sure it sets us up for success and allows us to correctly position ourselves in a new market. This video did a great job of opening my eyes to that and showing me that it is crucial that the prices of our goods are set correctly from the get go. Many companies have failed before even starting thanks to overlooking how important it is to price your product correctly.
Great video on pricing from Brian McCarthy. He’s right! Pricing is at the core of all marketing elements that can make or break a business. I would like to highlight the fact that having due diligence and being aware of your industry’s competitive intelligence is critical to set your pricing. With regards to real estate, yes you need to know your products and services inside out. While you need to know industry information, it is still crucial that you are aware of your competitors and how their market practices. Over the years, I have seen many investors sacrifice on integrity for the right price. This is something I am not willing to entertain. While I provide real estate and property management services for many investors, I will not cut corners or jeopardize my license to serve their greedy interests. With this, I have had many challenges formulating my fee schedules with and maintaining fairness and integrity among all my transactions. Logistically, I have to look at my interest returns as a basis for setting pricing. But at the end of the day, investors want to go with where they are getting the best services for the best price. Every case is different, but in the end, I always try to do my best by people.
This is a very informative and useful video. Mr. Brian McCarthy stated that a price could either help a business succeed or it could break the business. You have to take a lot of different factors into consideration before putting a price into a product or service. When I started my business back in 2012, one of my main issues was figuring out which cost method I was going to use. I wasn’t sure if I should choose the “Cost Focused” or “Competition Focused” or “Customer value-based Pricing” method. What I decided to do is ask potential clients what value did these products bring to them specifically. The second step that I did was purchased similar products from the competition directly. Finally, when I was ready to sell my products, I took into consideration all three methods and came up with a price that would make the most sense to my potential clients based on the value my product would bring to the client and also a price that was not far from the competitions. Even though my product was of better quality, my consumers were price sensitive.
This video does a good job of explaining the importance of pricing for an company and how marketers influence the process. I agree in that the focus of pricing should encompass all three methods, cost, competition and customer value in order to have the most effective price execution. A key message in this video is that of the importance of clearly communicating the differentiation of the products and benefits to employees and properly train the sales and marketing teams. If this not done effectively it can hinder the outcome which is profitability and higher revenue.
The video has been very helpful in explaining the different pricing strategies that companies use to price their products. At my current job, we have predetermined prices for all the products we sell, but sometimes the sales people give special pricing for their customers based on the relationship they have with them. They want to make sure that the customers are happy while at the same time generating profits for our company. Sometimes the sales people at my company give special pricing to compensate any difficulties or issues our customers had experienced in the past, and sometimes they give special pricing for being new customers, depending on who the customer is. This falls within the Customer Valued Based Pricing.
Great and very instructive video which provides useful solutions to design the best pricing strategies; this became extremely beneficial for my current job position in the dairy food industry. Working with customers from different countries needs to take into consideration diverse elements in terms of setting a pricing list, like agreeing the price per container, or volume purchased. We use the three methods presented in the video: cost focused, competition focused, and customer value - based price. But, we always try to provide our customers with the best options to build long term relationships. This video is valuable to understand the process of determinate the right pricing methods and execution that it fits our company, and at the same time build customer value.
Watching this video really changed the way I looked at pricing. In this video, I learned how important pricing is and how determining a price doesn’t really mean this will be the set price of the product, since there are a lot of aspects or noise to keep into consideration at the time of execution. As part-owner of a small family business in the Dominican Republic, I never really understood the different options of methods available to set the proper price for our services. We always based ourselves on the competition and what other people where offering out there. One thing I would be taking into consideration from now and on whenever we’re setting prices and developing future pricing strategies is to focus on setting pricing methods that make sense to my industry - understanding the cost, monitoring competition, and recognizing the importance of a price based on the value of the customer. Moreover, I would be focusing on having a strong price execution as we go to the market - having someone who would understand the importance of price and how to properly introduce the profit equation and help to set the right standards based on my company’s values, communicate differentiation and benefits of my services, and invest in training for my personnel.
Thank you, professor McCarthy, for summarizing and synthesizing these terms for easier and faster comprehension of the topic. Great video!
Mr. McCarthy presented a very thorough and comprehensive outline for how pricing relates to marketing and how you can position your marketing campaign towards success by practicing profitable, competitive prices. The industry that first came to mind was fashion retail. With 4 years of in-store experience and 1 year of corporate experience, I understand the importance of meticulously following effective pricing strategies. From a top-down perspective, a business can decide on a price for a product, but how it travels from the corporate, district, local, and store levels is crucial to executing the pricing technique. I am a firm believer, more employers need to seek the suggestions and recommendations of their sales managers and associates to creating effective pricing strategies for their brand. As a manager or associate, you are working closely and intimately with a client on shopping decisions that weigh very heavily on their satisfaction levels. Additionally, because many customers practice comparative shopping, they can determine what they'll pay for a product fairly quickly because they have done research. What Mr. McCarthy failed to mention is how a marketer can intercede and interrupt the pricing strategy sessions in the business? This question may sound simple, but in my experience in corporate, the pipeline of communication isn't clear or easy to navigate. Who makes the final pricing decisions? The marketer? The wholesale eecutive? The sales director?
Pricing is a new concept for me. In my current job, we don't have to determine a price of products. We have set membership prices that don't typically increase. This video helped me understand how to efficiently determine how to set prices. The price can raise or lower profitability by 50% was very interesting to me. The price means everything to a consumer and if you think about it, when we go to a store that's almost the first thing you look at and that helps you determine if to purchase or not. Marketing is such a broad area and this course has helped me realize how many things to take into consideration when it comes to the consumer. Pricing is one thing I didn't really think about, you would think that this would be determined by the financing department but this helped me realize that pricing is a huge process in the sale of a product or service.
The video is informative and accurate. Since I started my first steps in marketing my first manager told me that pricing plays a critical role in decision-making as well as building an image for the company. In my own company, I decided to focus on small business and entrepreneurs. Thus, the decision then lies with my company, or whether I want to target the premium customers or the volume customers - And this decision can be made by managing my pricing strategy, hence, I set my pricing to fit my clients and my target market. I truly do believe that pricing strategy is one of the most important P in the marketing mix and its importance is increasing with the increase of products and services worldwide.
After this video, you will gain an understanding of the pricing method and the pricing execution. I no understand that pricing method help a company determines the price it will go to market with. A company must focus on the cost of producing the product or service, price of competition, and customer value. Now I now the effective formula to set price. Thank you for sharing.
This video was really helpful in understanding pricing methods and execution. I personally have no experience in pricing decisions nor go-to-market pricing strategy. This video explained in a simple and effective manner what you should cover on pricing in order to succeed. Pricing is a critical element that if we don’t manage it well could ruin the entire business. From this video, you can see that external elements like, competitors and consumer perception, are as important as internal values like your costs and contribution margin goal. Many factors to think of before setting the final price. Many elements I mentioned above plus remembering that your competitors are on your heels, the consumer value- based and other external factors (trends/insights/seasonality), that you should consider as well before setting the price.
I have previously worked in marketing departments as well as design departments in companies, and haven't really been around numbers and pricing. This video helped me understand better the pricing process, from revenue, costs and profits. I believe every marketing department should be aware of the company’s numbers and pricing, because they may be used as leverage in strategies depending on them.
There are multiple take aways from Brian McCarthy's pricing video. He mentions how relevant it is to consider both pricing methods and pricing executions when it comes to setting the right price for your item. This information is very influential and inspiring for someone within the marketing or sales realm. Many people, and I include myself, have found this procedure of setting the right price for an item or service quite difficult, but Brian presents us three different pricing methods and explains executions that will give that pricing a reasoning. The way this is influential is because it will reset your mind and helps you understand that its important to price for value and to be ready to sell with a strong price execution.
Pricing is a critical part of the profit equation. Pricing itself can either lower or raise profits by significant margins that can affect a business. The key points of pricing methods and execution are crucial because one, it determines the market prices and two, the ability to price. I think these two key factors are critical because it shows the business is focused on not just beating the competition but valuing its customers. Furthermore, the execution allows for that further research on current and future customers. This is because as a business, you want to be aware why your price can communicate a differentiation between another competitive company and highlight the benefits for a higher prices or even lower ones.
This video has definitely influenced me to change my approach to pricing within my photography business. Thank you for breaking down pricing the way you did and clearly identifying the two key considerations in deciding pricing; methods and execution. I realized that I have only considered my expenses and customers without considering my competition. The fact that you shared that, “studies have shown that small variations in price can raise or lower profitability by very significant margins” was alarming and really has encouraged me to spend more time researching so that I can perhaps introduce new pricing for this upcoming year. Value pricing and strong execution here I come!
It is easy to think that the right thing to do as a brand, is to bring up the price for immediate profitability. I like the way Brian mentions that the price can be a great way to either increase profitability or ruin your business. It really makes you realize that you cannot just carelessly increase your price as a quick fix. The pricing methods discussed together seem like a sound strategy that, along with the Pricing execution, could lead to a healthy profitable price for a product. I agree that there needs to be a focus on market research, an eye on the competitor costs as well as keeping that return on investment in mind. I tend to focus just on the ROI and the fixed cost and fail to see the competitor pricing or the customer value. This will be something that I pay more attention to.
This was a great video. This puts of my pricing questions into perspective. I have always wondered how the price of an item was determined. Now I know, there are pricing method and pricing execution to accomplish things. Understanding how the pricing method entails cost, competition, and customer value makes total sense, and will help me in the future when put in situations involving price.
This video introduces marketing perspectives that many people tend to overlook. Often at times, people think marketing is all about advertising and making sales, however, a major role that marketing plays in the business world is knowing how to effectively price your product on the market. As quoted in the video by Warren Buffett, “the single most important decision in evaluating a business is pricing power.” If marketers do not take this concept into consideration, their other marketing strategies, advertising and sales, will turn out to be ineffective.
"Pricing is a critical part of the profit equation,” in getting the price right, specifically for your target audience, impacts the profitability for your business. It’s imperative to know the two key considerations that were covered in the video: pricing method and pricing execution. The pricing method refers to how a company determines its go-to-market prices while the pricing execution refers to a company’s ability to actually get the price it sets. Using these concepts as a “rule of thumb” gives more insight on what is important when setting a price. We must know the appropriate price range to set for specific products and must also take into consideration whether that set price will boost the overall profit for our business.
This short video provides crucial information about pricing. As a matter of fact, I think that the way businesses set their prices needs to be evaluated carefully, as it can have consequences. Basically, businesses charge their customers for the consumption of the product and the value that they get from the service. In my opinion, businesses need to understand how pricing affects their models, so they can better select their prices. Pricing does not only play a crucial role in the decision making of businesses but also helps on building either a positive or negative image towards them. In that sense, I think that the customers and the competition need to be taken into account to know what prices the business will set.
your teachings are really helpful and clear.
Thank you, they help me understand these principles so much better
This video presents a clear and simple overview of price and pricing methods. As marketers is vital to take into consideration how the correct pricing method can affect the profit equation - as explained by McCarthy. Particularly interesting, the customer value-based pricing as it reflects the value of the product/service from the customer’s perspective and level of affordability.
Although, this pricing is primarily set per the customer’ s perceived value of the product, is important to segment the market as part of the pricing execution; this would allow engaging with different types of customers/consumers as the prices would reflect these variations. This goes aligned with the fact that an organization/company must have a comprehensive understanding of the costs and monitor competition to use their pricing as another path to differentiation.
Thank you!
I was not aware of the importance of pricing. I enjoyed watching this video, as it was very detailed in explaining pricing. It was interesting to earn that pricing is the fastest way to increase profitability with in a company, and it is the fastest way to ruin a business. When I first thought of pricing, I thought of just adding a value to a certain product or service in regards to certain quality. A company should carefully consider all variations within their pricing methods in order to raise their profit. They should also pay close attention to small details and ensure they understand the best pricing method that fits the company. An interesting fact found in the video was that companies could actually price products and services based on customer value. This helps companies focus on customer needs, the benefits produced by products or services, creating value and increases customers’ willingness to pay for the actual product or service. If I had an organization, I believe this would be a great method to price products and services because it would require extensive research on the target market and would create opportunities to build strong rapports with customers. The only two problems I would potentially face while using this method would be collecting all the information needed on customers and if successful, the increasing profit could open doors for new competition within the market and industry.
This information is very powerful in an environment where everything is becoming a commodity. In today's environment, driving efficiencies in price is playing a very critical role in winning business and remaining competitive. However, the downside is that it is disrupting many industries and companies. Of particular importance, is the concept described as pricing for "customer value". If you are able to articulate the value correctly, you can then, position your product more effectively and more importantly, speak your customer's language. You need to know how the market is pricing, how your competitors are pricing, what your prospect/target is buying, what your contribution margin is in order to craft this "customer value" pricing approach. You need data. Your need to gather specific data to craft your approach, your go-to-market pricing strategy. You can definitely grow the value of each unit by taking this approach and in turn, you can definitely grow your profits.
I really like the video. It made me realize how important is to understand the customer value-based pricing decision. When we focus on costs and competition to set the price we might end up lowering a lot the product's price in order to sell faster. Customers could distrust the product because the price looks too good to be true.Very attractive prices, in some cultures, raise suspicions. Having in mind the customer's mentality can help finding the "perfect" price as well.
Very good ! great explanation
Very useful information. Nice refresher on pricing! Thank you for posting it.
Thank you for this video. I wasn't clear on how to approach pricing before but this got me off to a good start. One concept that stuck out to me is the chance that your competitor may react to you undermining its price point. While I'm willing to beat out the competition and forfeit a percentage of my profits to gain customers, I hadn't considered that my actions may trigger a response. Where does product value come in in regards to pricing? Making a product too affordable could, in some ways, devalue the brand correct? Thank you.
Great video! The first approach really connects with me as I can use the customer value-based method in the industry I work, which is advertising. I strongly believe that this is the most suitable method for an agency like the one I used to work where offers customized and personalized solutions to each client.
Mr. McCarthy, this video provides very good and interesting information. Pricing is a very critical component in a business. Your statement that studies have shown that small variations in price can raise or lower profitability as much as 50% is remarkable. It highlights the importance of pricing showing why we must be very careful in pricing method. I think a lot of companies do check the competition's pricing and don’t see the negative customer value or price war profitability their strategy includes. While watching this video, I thought of the ongoing fight between Amazon and Walmart. Amazon will reduce prices based on competitor pricing and Walmart will make sure their customers know that they will match any price from competitive vendors on printed flyers or website. Amazon is making it difficult for Walmart, or any company to compete. It’s frustrating as a customer because as I ask myself - is this competitive pricing affecting our service quality? How do we even know if the prices are reasonable or justifiable?
Great video, pricing is complex and this video makes it straightforward. Consumers nowadays can do price comparisons with the just a few taps on their phones in seconds. Where I work we use perceived-value pricing because of the reputation of our brand that allows to charge a premium. I work in a Caterpillar dealer and we charge a premium because of the value we offer with our products. The workmanship and quality of Caterpillar products has built a lot of brand equity, however due to increase in competition we're moving to value pricing.
Written text of your comment: Many companies utilize various methods of pricing for their products and services. However, it is up to its discretion, which options to execute. High-end department stores such as Bloomingdales, Neiman Marcus, Nordstrom, and Saks Fifth Avenue sell designer merchandise for an extreme amount of money without being mindful of using strategic tools, yet instead, they execute a cost-focused method to achieve ROI, considering the conduction of a wholesale transaction. Its focus embodies on export trade and taxes. Although consumers are willing to pay X amount of money for a bag because of its name, it is not equivalent to customer value method with a strong pricing execution. Today, retailers are therefore struggling to generate substantial revenue due to consumers self-conscious price awareness; they tend to search for lower prices and sales deals. Therefore, when it comes to price placement, we need to be aware of implying both a strong pricing execution for it to become achievable.
I really like the idea of a customer value-based pricing and I think it’s an approach that, if done well, can create great revenue for a company. Smaller and medium-size businesses may not have the resources necessary to conduct all the data that will allow for this kind of pricing approach, so they will more than likely turn to the competition or cost methods instead. I agree with Mr. McCarthy in that the best idea is to use a combination of all three. Any company will automatically have the cost of their goods or services, so it’s a matter of doing some research on competitors and gathering data from customers. For small businesses that may not have the resources to conduct research, there are tools out there that can provide some insight as to how their product or service is doing such as customer reviews (Yelp, Google reviews), the only downside to this is that this is done once the product is in the market, and a company would have to adjust their pricing post-launch.
Before this video, I hadn’t really considered the aspect of matching or competing with competitors. I was only focused on my belief in my future business and the costs involved, not factoring in the effect that other similar business may have. Their prices and promotion can effect my own business success, because often customers go with the best pricing, whether or not the quality is better. For example, different grocery stores match prices if you find a cheaper price of the item in common and bring proof. This may seem like a loss by having to reduce the cost, but in the long run, you are keeping business with customers and still getting most of the revenue income intended. The other company may not have as good as a quality as the same product, and therefore they may suffer more loss even though they sell the item at a cheaper cost.
Costumer Value based pricing is a topic I have been exposed to before, mainly in my previous job. I used to work in a gym in my home country, and here they tried to maintain their price based on costumer value. It was hard for the people in the marketing team to know exactly how much each costumer was willing to spend, how much they thought the gym was supposed to be priced at, and many other aspects. Due to this past experience, I have a kind of negative view on costumer value based pricing. But after watching Dr McCarthy’s video I see that it actually is good because it will be better for your relationship with costumer in the long run and the costumer will be most likely to return due to the relationship that has formed.
When discussing cost focused pricing, the concept of the value that customers place on a product not being factored into the actual cost of a product reminded me of distribution approach in a way. With the distribution approach, other factors that impact the product are not factored into the price; with the negative side to cost focused pricing, the actual value that customers place on a product is not factored into the cost. Applying this to my brand, I must consider how much I am expending in creating and marketing my brand. Of course I am going to put my best efforts into marketing myself, but what happens if my audience does not recognize the value of that? They may place a low value on that and will consequently not be willing to pay much for my services. Considering the positive side of cost focused pricing, all of the information that I need in order to set my price is available if I know my cost. I am aware of how much time and energy I expend towards my brand and can therefore set the price accordingly. However, I must remember that the value that I place on my brand may not equate to the value that my audience will place on my brand. Finding this balance and setting my price accordingly is key in ensuring that I am able to make a profit.
This video, by Brian McCarthy, provided information about pricing in marketing and how different pricing methods can help a company determine how they are going to price their product or service. Brian McCarthy spoke about three methods that could be used to make your pricing decisions: cost focused, competition focused, and customer value-based pricing. Of the three, the company that I work for mainly utilizes the “cost focused” method. When determining the prices of the fire extinguishers that we sell, we always take into account our cost to purchase it from a distributor. We take a look at how much we pay for the actual extinguisher, plus the shipping cost to get to our warehouse. Once we have those two factors determined, we make a decision on which price will cover our cost, as well as generate a profit, per extinguisher sold. As mentioned in the video, “small variations in price can raise or lower profitability,” and in my company’s case, this is spot on. Simply raising or decreasing our price by $5.00 has a significant effect on our profit. This is why we try to avoid lowering our prices per extinguisher because our variable costs only keep increasing, as the years go by. If we begin to lower it too much, we risk the chance of low profitability, which decreases our overall revenue. This video ties into our lecture about price change equations and how one can utilize their CM and revenue to analyze how effective or ineffective a price change can be. This was a great video to watch if you wanted a quick review about pricing in the marketing world!
A brand is the gut feeling of your customer when looking at or buying your product
I want to share my personal experience with a commission based job that I had several years ago that can really reflect the different aspects of the power of pricing. This job was a selling job in the cosmetic industry and we (the sells persons) were allowed to determine the price by ourselves in order to increase our commission. With every customer, I had to calculate all the variables discussed in the video in my head over a period of time of about three minutes and present my customer the suitable price. Some of the aspects that crossed my mind in the three-minute speech that I had to know my client was: who is my client? How much does she pay for her current products? How much does my bid need to be in order to make a profit after deducting the promotion that I will offer them to close the deal(price execution)? I think that all of these variables need be taken into consideration when you do your pricing, but the method that leads my decision making was to price high in order to create costumer based value. In simple words, I priced high, although I know she pays much less to make my product a premium product and distinguish it from what she already has.
The perceived value of pricing is the most important aspect of pricing to me, because you can charge a bit more if there's more perceived value. I would always hate my pricing strategy to be solely based on reacting to competitor pricing.
Vancouver SEO Expert Thanks for the comment! I agree that, if possible, value-based pricing is the best way to go.
That is exactly what I thought. But as I saw this video and thought about what I have previously learned in marketing classes (marketing masters :)) I think the costumer value based pricing is pretty important. After all, you want to make sure your costumer is happy and willing to return and purchase more things or services from you. With out the costumer you are nothing, so in my opinion costumers are the priority!
I couldn’t agree more, The correct pricing strategy can make or break a business. As a small-business owner, your strategy dictates not only your profit but the way your product is perceived. price is set at the highest level that your target market is willing to pay to find this balance is the most challenging part in every business.
That’s a great point. I also agree that the value-based pricing is by far the best method. In some cases, it’s very difficult to get feedback from customers or do a market research study and therefore it’s tough to put a value on the product or service. There are some really great companies out there that use this type of method to decide on prices.
The actual value and the perceived value both are important. Perception is the reality.
The most interesting part of the video for me was the pricing methods part, the author explains that there are three different methods: the cost focused, the competitor focused and the customer value based pricing, and although the idea is to use the three of them in our companies to get the best strategy possible, there is always a predominant one and we can see it on our everyday products.
An example of a cost focused method would be a restaurant, usually they take the cost of their dishes and multiply it for a factor, to get the final price of the dish.
A product with a competitor focused price would be a commodity we get at the supermarket such as toothpaste or detergent, usually this products need to have similar prices in order to compete against each other.
Finally the most interesting one for me, and the one capable of delivering the biggest profits would be the customer value based pricing, and we can see it on products such as the Iphone or a new version of Nike shoes, where the cost of manufacture is minimal compared to the price it is sold to the public.
nice explaination thank you sir
+Syed mudasir Ali Thank you for the comment. You are very welcome!
Thank you this was very helpful and informative 👍👍
Glad it was helpful, Diontae!
thanks a lot, I got too much information on pricing!
+Omed. zerra You are welcome. Thank you for commenting!
It is often times hard to create pricing for your item. This video was very helpful! Thank you!
+BRITTANY CRAWFORD I'm glad my video was helpful. Thank you for letting me know.
thanks a lot sir
How about in an industry where you have practically zero competition? We make photo matts (custom designs) which you can frame and obviously hang on a wall. That I know of yet in the United States, we do not know of anyone else who is doing the same thing as we are. What should our pricing strategy be based on? We are B2C for now.
Thanks for the question. I recommend basing your pricing strategy on a combination of value and cost.
Actually, you do have competition... unless its unsubstitutable , you always have competition. Normal picture frames, posters, and even art work are considered competition. Brian's recommendation on value should be number one. How valuable are custom photo matts to your target audience? Is it valuable enough to pay MORE than a similar piece of art work? If so, you have a little leverage to price your product more than the average piece of art work. You then have the challenge of communicating that your product is more valuable than other methods of wall hangings.
If I were you I would sit down and brain storm what makes my product more valuable than x,y,z. Then I would figure out who cares about this value?
50% Value Pricing , 25% competition, 25% cost
Keep in mind though, if this is intended for a niche market ( It sure sounds like it), then you need great margins to cover for the lack of units sold. This is usually the case for most customization products.
Hope this helped!
Hello Christopher,I believe your price should be based on the three price methods. Initially taking into account the cost price to guarantee a return on investment. Second, even if you do not have competitors who are doing exactly the same as yourselves, there are other companies that can choose in a slightly different way to cover the same need of your target market. At that time you should make a broader analysis of your competitors and their products and evaluate their quality in comparison with what you are offering. And lastly, in customer value-based, it will help you to determine how much your customers are willing to pay for your product.
Hello Christopher,
I agree with "tsusajop" on the fact that you do have competition and therefore you need to pay special attention to differentiation. That’s a key to success since it would raise brand recognition leading to customer loyalty and it would put you in a better position to increase your prices. A crucial step for achieving differentiation is to know who your target audience is in order to implement the right marketing strategy and a customer value-based pricing. Good luck!
I think that finding a niche that sets you apart from other companies is a major plus. People get excited for new products and become especially loyal when there's only a few places that carry what they need. They feel like what you have is almost as if it were made for them. Even if there are other competitors, the pool for customers isn't as bad because it's a unique market. What sucks is when other companies begin to copy your product and marketing, and you have to continue to be creative an innovative-but that's what we love! It's all about knowing your business and figuring out how to make things work better on every end.
great...,
Good explanations
Uddeepa, thanks!