Pricing decisions cannot be made in a vacuum because of inherent tradeoffs between other marketing mix elements, pricing will

depend on other product, distribution, and promotion decisions. Pricing can never compensate the poor execution of the other elements of the marketing mix but ineffective pricing can prevent the successful efforts of these in positive financial results. There is no one best practice for establishing the price of new products or modifying the price of existing products. The firms objectives, markets, costs, competition and customer demand patterns must be integrated in every price setting decision. The role of price for organizational buyers A price is considered as a function of costs and benefits. The entire product a buying center buys is much more than a physical item. They are buying a given level of product quality, technical service and delivery reliability. There are other influences may be of importance for the buying decisions like the reputation of the supplier, a feeling of security and personal relationships. It could be summarized into 3 categories: Product specified attributes Company related attributes Salesperson related attributes Pricing decisions and product policy decisions are inseparable. The buyer sees the cost of a business product as much more than the seller's price. The evaluation of a product based on benefit- dimensions to value them. Functional benefits ( design) Operational benefits (durability, reliability) Financial benefits (favorable terms, cost savings) Personal benefits (individual from a supplier relationship) Costs are not includes only price, also the transport, any administrative and associate costs. The Industrial Pricing Process The decision for pricing an industrial product is a multidimensional ongoing process. Pricing objects have to be consistent with the marketing and corporate objects i.e. a certain marketroi, market -share goals or beating competition. Pricing objects must be established carefully because of their far reaching effect. Two main strategies for pricing are Du Ponts skimming strategy which emphasizes specialty products that carry a high margin and Dows penetration strategy focuses first on pricing low margin commodity goods low to build a dominant market share and then on maintaining that dominant share. Demand determinants can vary a lot in potential demand, sensitivity to price and potential profitability across the market segments. Due to an individual perceived value of a product by each market segment and the evaluation of the cost/benefits tradeoffs the marketer should establish the price strategy. The price elasticity of demand should also be examined and is affected by the unique value effect: Features/benefits of a product that makes it unique, thereby lowering the price sensitivity of potential customers and raises consumers' willingness to pay higher prices the substitute awareness effect: depends on the relation between a customer's price sensitivity

and the awareness of the existence of alternatives and lowers willingness to pay higher prices Difficult Comparison Effect: a reduced importance of price because products are less able to compare and less substitutable total expenditure effect: the buyers gain more to find a seller with the same value but cheaper if there is a large expenditure sunk investment effect: the greater the sunk investment, the less is the sensitivity for the price price quality effect: the more the quality is assessed by the price, the less is the price sensitivity necessity effect: products that are perceived to be a necessity will be less price sensitive Cost Analysis One way to base the selling price is to add on the calculated unit costs a percentage of profit. Another way to base a price and capture an advantage in the market is to use target costing (designto-cost).That means to identify and target the best market segments and calculate the allowable costs. Due to the required attributes of each segment, the target selling price and profit margin are derived. To face the suppliers with the cost pressure each part or function will be broken down. Competition The upper price limit is set by all competitive market actors. The pricing policy depends on the perception of the organizational buyer for a particular product in compare to the competition. There are many dimensions more than the plan physical product to gain advantage i.e. services. Price Discounts The normally quoted price to end users is known as the list price. This price usually is discounted for distribution channel members and some end users. Hier Fallbeispiel HILTI

Pricing is an important topic for HILTI. Generally HILTI pursues a Price premium strategy and the customers a willing to pay higher prices due to HILTIs approach of direct customer support (Of the more than 14,000 HILTI employees worldwide, two thirds are involved in direct contact), demonstrations and engineering support. Brand strength empirically correlates with price premium.

HILTIs fair pricing concept HILTI also has a fair pricing concept which is more focused on the customers potential than the volume. HILTI offers a complete transparency of their prices on HILTI online and at the HILTI centers. HILTI divides into three potential categories, base, middle and top. On the base level potential (basis template) there is one product price for all industries. On the mid level potential there is an industry template sophisticated at industries. Only for the best third of the mid level customers are special agreements for the prices. On the top level potential are special agreements for the best two-third of the customers. Every year is a review process for the special agreement to align them.