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    Kotler mm13e media_14 Kotler mm13e media_14 Presentation Transcript

    • 14 Developing Pricing Strategies and ProgramsMarketing Management, 13th ed
    • Chapter Questions • How do consumers process and evaluate prices? • How should a company set prices initially for products or services? • How should a company adapt prices to meet varying circumstances and opportunities? • When should a company initiate a price change? • How should a company respond to a competitor’s price challenge?Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 14-2
    • Gillette Commands a Price PremiumCopyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 14-3
    • Synonyms for Price • Rent • Special assessment • Tuition • Bribe • Fee • Dues • Fare • Salary • Rate • Commission • Toll • Wage • Premium • Tax • HonorariumCopyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 14-4
    • Common Pricing Mistakes • Determine costs and take traditional industry margins • Failure to revise price to capitalize on market changes • Setting price independently of the rest of the marketing mix • Failure to vary price by product item, market segment, distribution channels, and purchase occasionCopyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 14-5
    • Consumer Psychology and Pricing Reference Prices Price-quality inferences Price endings Price cuesCopyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 14-6
    • Table 14.1 Possible Consumer Reference Prices • “Fair price” • Lower-bound price • Typical price • Competitor prices • Last price paid • Expected future • Upper-bound price price • Usual discounted priceCopyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 14-7
    • Table 14.2 Consumer Perceptions vs. Reality for Cars Overvalued Brands Undervalued Brands • Land Rover • Mercury • Kia • Infiniti • Volkswagen • Buick • Volvo • Lincoln • Mercedes • ChryslerCopyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 14-8
    • Tiffany’s Price-Quality RelationshipCopyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 14-9
    • Price Cues • “Left to right” pricing ($299 vs. $300) • Odd number discount perceptions • Even number value perceptions • Ending prices with 0 or 5 • “Sale” written next to priceCopyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 14-10
    • When to Use Price Cues • Customers purchase item infrequently • Customers are new • Product designs vary over time • Prices vary seasonally • Quality or sizes vary across storesCopyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 14-11
    • Steps in Setting Price Select the price objective Determine demand Estimate costs Analyze competitor price mix Select pricing method Select final priceCopyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 14-12
    • Step 1: Selecting the Pricing Objective • Survival • Maximum current profit • Maximum market share • Maximum market skimming • Product-quality leadershipCopyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 14-13
    • Step 2: Determining Demand Price Sensitivity Estimating Demand Curves Price Elasticity of DemandCopyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 14-14
    • Figure 14.2 Inelastic and Elastic DemandCopyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 14-15
    • Table 14.3 Factors Leading to Less Price Sensitivity • The product is more distinctive • Buyers are less aware of substitutes • Buyers cannot easily compare the quality of substitutes • The expenditure is a smaller part of buyer’s total income • The expenditure is small compared to the total cost of the end product • Part of the cost is paid by another party • The product is used with previously purchased assets • The product is assumed to have high quality and prestige • Buyers cannot store the productCopyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 14-16
    • Step 3: Estimating Costs Types of Costs Accumulated Production Activity-Based Cost Accounting Target CostingCopyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 14-17
    • Cost Terms and Production • Fixed costs • Variable costs • Total costs • Average cost • Cost at different levels of productionCopyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 14-18
    • Figure 14.4 Cost per Unit as a Function of Accumulated ProductionCopyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 14-19
    • 9 Lives Uses Target CostingCopyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 14-20
    • Step 5: Selecting a Pricing Method • Markup pricing • Target-return pricing • Perceived-value pricing • Value pricing • Going-rate pricing • Auction-type pricingCopyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 14-21
    • Figure 14.6 Break-Even ChartCopyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 14-22
    • Auction-Type Pricing English auctions Dutch auctions Sealed-bid auctionsCopyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 14-23
    • Step 6: Selecting the Final Price • Impact of other marketing activities • Company pricing policies • Gain-and-risk sharing pricing • Impact of price on other partiesCopyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 14-24
    • Price-Adaptation Strategies Geographical Pricing Discounts/Allowances Promotional Pricing Differentiated PricingCopyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 14-25
    • Price-Adaptation Strategies Countertrade Discounts/ Allowances • Barter • Cash discount • Compensation deal • Quantity discount • Buyback • Functional discount arrangement • Seasonal discount • Offset • AllowanceCopyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 14-26
    • Promotional Pricing Tactics • Loss-leader pricing • Special-event pricing • Cash rebates • Low-interest financing • Longer payment terms • Warranties and service contracts • Psychological discountingCopyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 14-27
    • Differentiated Pricing • Customer-segment pricing • Product-form pricing • Image pricing • Channel pricing • Location pricing • Time pricing • Yield pricingCopyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 14-28
    • Table 14.6 Profits Before and After a Price IncreaseCopyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 14-29
    • Increasing Prices Delayed quotation pricing Escalator clauses Unbundling Reduction of discountsCopyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 14-30
    • Brand Leader Responses to Competitive Price Cuts • Maintain price • Maintain price and add value • Reduce price • Increase price and improve quality • Launch a low-price fighter lineCopyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 14-31
    • Marketing Debate  Is the right price a fair price? Take a position: 1. Prices should reflect the value that consumers are willing to pay. or 2. Prices should primarily just reflect the cost involved in making a product.Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 14-32
    • Marketing Discussion  Think of all the pricing methods described in the chapter.  As a consumer, which pricing method do you personally prefer to deal with?  Why?Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 14-33