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Market Pricing

 

DisciplinesMarketing > Pricing > Market Pricing

Description | Example | Discussion | See also

 

Description

Research similar and related products in the market place to determine the range of prices that might be considered 'normal', matching in particular what you get for what you pay to understand the notion of 'value'.

Design and price goods to fit within this model, for example pricing higher for products with more features and filling in gaps. Ensure this takes account of customer perceptions of both your own and competitor products.

Example

A television manufacturer uses a weighted checklist of features to rate a range of TVs in the marketplace, mapping the functional score against price on a grid. They then use this to determine the market price for their own televisions.

A person setting up a local coffee shop visits other coffee shops in the area before pricing their own offerings within the range available elsewhere locally.

Discussion

Market pricing is the simplest method of determining price. Effectively, you are just copying what you competitors do.

Products can be plotted on a price-quality graph, where 'quality' is a combination of features and other advantages (such as store location, delivery times, etc.) into a single number. This will usually show an approximately straight line (or sometimes a curve), with lower quality offerings having lower prices and higher quality products being more expensive.

Market considerations should be taken into account in any pricing as this is the basic method by which customers determine what a 'fair price' should be. Products with higher quality than expected, for example by using the price-quality graph, may be considered a bargain (although it could also create suspicion). Products that are on the other side of the line indicate low value and may sell very badly unless some aspect of value (such as fashion desirability) has not been included in the 'quality' calculation.

See also

Market Research, The Price-Quality Graph and the Fair-Value Line

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