Price Segments and Components
Capsule: The Company implements its pricing policy and changes the level at which it prices its products by choosing the customer segments to receive the new price and then isolating the price change to those segments by using the four components of price.
For helpful context on this step:
- “The Dart Player’s Guide to Pricing When Prices Fall“
- “Discovering Hidden Pricing Power”
- “Turmoil Below: Confronting Low-End Competition”
- “Use Subtle Strategy in Tough Markets”
Symptoms and Implications:
- As large competitors match low prices, other competitors face difficulties
- Small discounting competitors have gained a market toehold
In some industry situations, the company wishes to change the prices on all products for all customers. More commonly, the company wishes to limit its price change to specific segments of customers. It changes the level at which it sets its price. The company chooses its segments according to the competitive price pressures or opportunities that create these segments. Then, the company limits the price change to these segments by using the four components of a price.
We discuss this approach to changing the level of pricing in the following sections:
The segments to receive the new price result from the pricing pressures and opportunities the market environment creates. These segments differ in falling price environments from those in rising price environments.
- Audio Tip #207: Targeting Segments in a Rising Price Environment
- Audio Tip #208: Targeting Segments in a Falling Price Environment
Every price has three components and, usually, a fourth. The company uses these components to focus its changing price on its chosen customer segments.
After you complete your review of this section, you may wish to test your knowledge:
If you would prefer to go directly to the Pricing Innovation ideas, see Improve/Pricing>>
The first step in reaching a new level of pricing is to choose your target segments. The next section examines these opportunities.
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