As Lesson 1.1 outlined the differences between consumer marketing and industrial marketing, those differences can further be explained based on the distinguishing characteristics of industrial pricing. Some of those characteristics are listed below:
Pricing in industrial (business-to-business) markets
As Lesson 1.1 outlined the
differences between consumer marketing and industrial marketing, those
differences can further be explained based on the distinguishing
characteristics of industrial pricing. Some of those characteristics are listed
below:
1. The true price as industrial
customer pays is often different from the list price because of factors like
delivery and installation costs, discounts, training costs, trade-in allowance,
financing costs and so on.
2. Pricing is not an independent
variable. It is highly intertwined with product, promotion and distribution
strategies.
3. Price for industrial products
cannot be set out without considering other products that are compliments or
substitutes sold by the firm. Cross elasticities exist, where the price of one
item affects sales of other items.
4. Prices can be changed in numerous
ways such as changing the quantity of goods and services provided by the
seller, changing the premiums and discounts that are offered, changing the time
and place of payment, and so on. This implies that pricing is often a more flexible
decision than product or distribution decisions.
5. Industrial prices are
established, in many cases, by competitive bidding on a project-by-project
basis. In a number of cases, prices are resolved through negotiation.
6. Industrial pricing is often
characterized by an emphasis on fairness. Industrial buyers, who are
experienced and able to estimate the vendors’ approximate production costs expect the
price increases to be justifiable on the basis of either the cost increases or
product improvements.
7. Industrial prices are affected by
a host of economic factors such as inflation, interest rate changes, exchange
rate fluctuations and so on. This problem is particularly critical for the
marketer locked into a long term contract with no escalation cause.
Tags : MARKETING MANAGEMENT - Pricing Policies and Constraints
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