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In choosing a price type an organisation signals its strategic intent, as it does with its choice of market positioning strategy. Price type, unlike market positioning strategy is an observable signal, and one that competitors respond to.
There are multiple roots underpinning the formulation of the price types. These roots include the characteristics of the contract type, availability of information, economic effects to be activated, and bargaining power. The proposition is that providers in choosing a price type reveal their strategic intent to both buyers and competitors. Competitors also use this information to develop competitive responses. Buyers also respond to this signal, which influences their perception of the provider.
Pricing Types: Signalling Market Positioning Intent describes essential tools for analysing markets. These tools are:
· The value map. A graphical tool using demand and preference curves to plot the relative place of competing products in a market.
· A method to decode the information in an organisation's selection of a price type. Price types are categorised according to the market positioning strategy they support.
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