Topic 6 - Pricing In Financial Services

Competitive pressure forces prices down whilst economic pressure and cost structure forces prices up to create a discretionary price region that businesses can use to set prices. The natures of services makes value hard to communicate and the nature o demand makes volumes and pricing hard to estimate. Additional prices must have additional value and prices include quality comparison and ability to solve a problem.

Value can change due to:

- increasing competition

- time elapses

- power of legislation, education and communication

Price discretion is the reward for good marketing which is effective when organisational and customer value is delivered. The price is "right" when perceived value outweighs perceived costs. Value occurs when perceived

value is equal to perceived cost. Actual price

= list price + added charges (discount + allowances + cost of credi/payment methods).

Pricing decisions rely on 2 factors:

Internal Factors:

- Marketing objectives

- Marketing mix strategy

- Cost

- Organisational Considerations

External Factors:

- Market and demand

- Competitor prices and offers

- Other external factors

There are 2 price demand relation ships for goods:

Most goods:

Whereby, as demonstrated, as price increases then quantity will decrease. The slope/gradient of this relationship is constant and ensure that for most goods, there is an appropriate level of quantity and price of goods on the shelves.

Prestige Goods:

When a prestige good is placed into the market if there is high demand then the quantity of items in the market will decrease. This occurs when the price of a good is low. When there is a intermediate price, then there will be a maximum amount of prestige goods within the marketplace.