Special pricing.

COST–VOLUME–PROFIT ANALYSIS

Special pricing
Effects of special pricing on markets and customers

Special pricing for markets and
customers
 There are mainly four different types of pricing strategy that are used in
the market; these are premium pricing, economy pricing, penetration
pricing and skimming pricing.
 Special pricing for some markets or customer is different from all the
above pricing strategy as the strategy is mainly about pricing the
products or services to attract more customers or to achieve a particular
market objective (Utaka, 2018).

Determination of customer
profitability
 In simple term customer profitability is the profit that an entity makes by
serving an individual customer or by serving an individual group of
customers.
 The difference between the amount of revenue earned from a customer
and the cost associated with the customer in a period is termed as
customer profitability.
 The higher the profitability from the customer the better it is for an
organization.

Effects on revenues and profitability.
 In case a market has surplus demand over and above supply then the
market will experience higher customer profitability.
 On the other hand lower customer profitability will be experienced in the
market where the supply is in excess of the demand.
 The revenues would increase along with profitability for a firm if it can
satisfy the demand of the customers effectively.
 On the other hand lack of strategy may negatively influence the
revenues and profitability of a firm (Allen, 2018).

Advantages
Financial and non-financial advantages of special pricing include the
following:
Financial:
 The advantages of special pricing include increase amount of revenue
and profitability for a firm if it can properly implement the special
pricing.
Non-financial:
 Advantages include increase amount of customer loyalty and increase in
value of goodwill of a firm (Jackman & Shanahan, 2017).

Disadvantages
Financial and non-financial disadvantages include the following:
Financial:
 Disadvantages on the other hand include negative impact on the demand of a product
or services offered by the firm.
Non-financial:
 The goodwill of a firm can be negatively influenced and loyal customer base can also
be reduced significantly if the implementation is not up to the mark.

References
 Allen, F. (2018). Strategic management and financial markets. Strategic
Management Journal, 15(S2), 11-22. doi: 10.1002/smj.4250141004
 Jackman, S., & Shanahan, Y. (2017). Customer Profitability Analysis:
Frustration Leads to Evolution. SSRN Electronic Journal, 2(2), 12-24. doi:
10.2139/ssrn.419581
 Utaka, A. (2018). Pricing strategy, quality signaling, and entry
deterrence. International Journal Of Industrial Organization, 26(4), 878-
888. doi: 10.1016/j.ijindorg.2007.07.005