Directions: Read through the following questions and answer the questions to the

Question

Directions: Read through the following questions and answer the questions to the best of your ability.

Provide an explanation of each pricing strategy (next to blank “i”) and example of when you would use each of the pricing strategies (next to blank “ii”). (Note: Provide an example that was not discussed in lecture). Then indicate which of the 3 sport finance classifications (public, private-not-for-profit, or commercial) this strategy could be used (next to blank “iii”). If the pricing strategy can be used for more than 1 finance area, indicate all areas it could be used.

Pricing for cost recovery

Create new resources

Establish value

Influence behavior

Promote efficiency

Promote equity

Use the following example to apply the information regarding the 4 areas within “nature of price”. You are considering attending a professional conference to gain updated information on technology, issues and challenges in the industry, best practices, market research, and you also want to network and connect with friends who also work in the industry etc. This is a 4 day conference from Wednesday-Saturday.

What monetary prices could you incur?

Direct

Indirect

What opportunity costs could you incur?

What psychological costs could you incur?

What effort costs could you incur?

Indicate the advantages and disadvantages of using each of the 4 pricing strategies discussed in class. Then provide examples of when this pricing strategy could be used and a justification for that use.

Arbitrary (def):

i.Advantages:

ii.Disadvantages :

iii.Examples:

iv.Justification:

Competitive pricing (def):

i.Advantages:

ii.Disadvantages :

iii.Examples:

iv.Justification:

Willingness to pay/market pricing (def):

i.Advantages:

ii.Disadvantages :

iii.Examples:

iv.Justification:

Cost recovery pricing (def):

i.Advantages:

ii.Disadvantages :

iii.Examples:

iv.Justification:

Explanation / Answer

Answer:

Competitive Pricing:

This kind of pricing is generally used by businesses which are selling similar products which generally tend to have similar attributes. Competitive pricing can be defined as "setting the price of a product or service based on what the competition is charging". Services can vary from business to business while the attributes of a product remain similar. So, when this strategy is used? This type of pricing strategy is generally used once a price for a product or service has reached a level of equilibrium, which often occurs when a product has been on the market for a long time and there are many substitutes for the product.

Businesses have three options when setting the price for a good. They can set it below the competition, at the competition or above the competition. Above the competition pricing requires the business to create an environment that warrants the premium, such as generous payment terms or extra features. A business may set the price below the market and potentially take a loss if it thinks that a customer is more likely to buy other products as well.

For example, consumner electronics company from India, Micromax. This company have grabbed attention of Indian consumers significantly in last 3 years and all because of cut throat competitive pricing. Micromax changed the pricing strategies of other companies by setting its prices below the market price with compelling features of products which consumers could not ignore. They set market prices for mobiles so low and with satisfactory performance from products, it gained popularity among the consumers and today known as a successful / leading company. Also it revolutionized the pricing stragtegies in India for its competitors as well.

(a) Advantages: One advantage of competitive-based pricing is that it avoids price competition that can damage the company.

If competitors are pricing their products at a lower price, then it's up to the company to either price their goods at a higher or lower price, all depending on what they want to achieve.

(b) Disadvantages: Potential disadvantages include that businesses may need to engage in other tactics to engage customers if the price is not enough of an incentive.

This pricing strategy is mainly for commercial companies wherein there is fight for market share and profits in the industry and hence it is mostly advisable for such companies only due to chance of potential loss. Public companies also may use this strategy upto certain extent, but not at the extreme level due to commitment to shareholders.

As proft making is irrelevant for not-for-profit companies, this strategy is not used by them.

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