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Marketing Mix Price
 

Marketing Mix Price

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Detail explanation of Marketing Mix 7P's pRICE

Detail explanation of Marketing Mix 7P's pRICE

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    Marketing Mix Price Marketing Mix Price Presentation Transcript

    • Pricing Strategiesand Determination Manish Kumar
    • What is Price? Price is the sacrifice that one party pays another to receive something in exchange For our case, price is a monetary value charged by an organization for the sales of its products
    • Determining the Base Price Cost-Plus Pricing  Easiest, Often misleading  A simple allocation of fixed and variable costs  Standard mark-up - a standard profit margin  Target return pricing - a standard amount of profit per item  Ignores demand (price sensitivity) and fails to account for competition
    • Determining the Base Price Demand Pricing  Based on the elasticity of demand • Higher prices are favored with inelastic – Price increases offset volume losses • Lower prices are favored with elastic – Volume increases offset price reductions • Consumers are indifferent with unitary demand  Breakeven analysis  Demand schedules
    • Determining the Base Price Demand Pricing  Profit-Maximization • Calculate the profit at each price point on a demand curve and choose the highest • In other words, which price produces the highest total contribution • Verified by observing marginal revenue and cost figures
    • Determining the Base Price Demand Pricing  Where does demand information come from? • Analytic modeling • Experiments • Customer surveys • Managerial judgement
    • Determining the Base Price Ethical LegalStrategic Pricing Concerns Concerns Concerns Low cost Differentiation focus focus price unique Competitive Strategy Positioning Continuum
    • Determining the Base Price Ethical LegalStrategic Pricing Concerns Concerns Concerns Low cost Differentiation focus focus price unique Competitive Strategy Positioning Continuum
    • Determining the Base Price Ethical LegalStrategic Pricing Concerns Concerns Concerns Low cost Differentiation focus focus price unique Competitive Strategy Positioning Continuum
    • Determining the Base Price Ethical LegalStrategic Pricing Concerns Concerns Concerns  Objectives  Goal-setting/Objective-setting  Pricing to achieve a target ROI  Pricing to stabilize price and margin  Pricing to reach a target market share  Pricing to meet or prevent competition  Pricing for profit maximization  Pricing for survival
    • Determining the Base PriceStrategic Ethical Legal Concerns Concerns PricingConcerns Penetration Skimming Pricing Pricing Strategy Strategy Maturity Decline Growth Introduction  New product pricing  Skimming Vs. Penetration
    • Determining the Base Price Ethical Strategic Legal Concerns Concerns Pricing Penetration Concerns Pricing Strategy Skimming Pricing Maturity Decline Strategy GrowthIntroduction  High initial price for quick ROI  Inelastic demand  Price insensitivity by the market
    • Determining the Base Price Ethical Strategic Legal Concerns Concerns Pricing Skimming Pricing Concerns Strategy Penetration Pricing Maturity Decline Strategy GrowthIntroduction  Low initial price with elastic demand  Volume for lower production costs  Imminent competition
    • Determining the Base Price Ethical LegalStrategic Pricing Concerns Concerns Concerns  Price-Quality judgements  Customers uncertain about brand quality prior to purchase look to price  Customers look to price in high risk purchases
    • Adjustments to Base Prices Reasons base prices change over time:  Variation in objectives over product life cycle • Introductory low prices, higher decline prices  Competitive price moves • Competitive forces dictate modification of pricing
    • Price Flexing Discounts/Allowances Reasons base prices change over time:  Price Flexing - Discounts/Allowances To Consumer To Trade Trade-in Allowances Functional Or Trade Cash Discounts Seasonal Rebates Quantity Cash Sales Promotion
    • Price Flexing Discounts/AllowancesTo Consumer Trade-in Allowances  Usedto Cash Discounts encourage consumers to Rebates upgrade to newer or more expensive products
    • Price Flexing Discounts/AllowancesTo Consumer Trade-in Allowances  Seasonal or age- Cash Discounts based discounts used to encourage Rebates purchases
    • Price Flexing Discounts/AllowancesTo Consumer Trade-in Allowances  After the Cash Discounts purchase payment made to the Rebates consumer by the producer
    • Price Flexing Discounts/AllowancesTo Trade Functional Or Trade  Compensate the trade for functions Seasonal performed: Buying & Selling Quantity   Transportation  Storage Cash  Financing  Risk-taking Sales Promotion  Providing Information  Standardizing & Grading
    • Price Flexing Discounts/AllowancesTo Trade Functional Or Trade  Permitsseasonal Seasonal marketers to maintain steady Quantity production and to Cash sustain operations in out- Sales Promotion of-season lulls
    • Price Flexing Discounts/AllowancesTo Trade Functional Or Trade Seasonal Price Quantity Cash Spring Summer Fall Winter Sales Promotion
    • Price Flexing Discounts/AllowancesTo Trade Functional Or Trade  Induce larger- quantity purchases Seasonal and to reward Quantity customers for making fewer Cash purchases but Sales Promotion purchasing in larger quantities
    • Price Flexing Discounts/AllowancesTo Trade Functional Or Trade  Encourage prompt payment from Seasonal customers. Invoice Quantity includes payment terms and period of Cash time that the cash Sales Promotion discount is available
    • Price Flexing Discounts/AllowancesTo Trade Functional Or Trade  Two percent off the total invoice price if Seasonal paid within 10 days Quantity of the invoice date. Otherwise the total Cash invoice price is due Sales Promotion in 30 days 2/10, Net 30
    • Price Flexing Discounts/AllowancesTo Trade Functional Or Trade  Used by producers Seasonal to encourage greater purchases Quantity or used to induce Cash retailers to provide shelf or Sales Promotion display space
    • Price Flexing Discounts/AllowancesTo Trade Functional Or Trade Off-Invoice Seasonal Allowances Quantity Bill-Back Allowances Cash Sales Promotion Stocking Allowances
    • Other Forms of Price Flexing Price shading  Salesperson reduces base price because of the need to secure a large/important client Price customizing  New technology allows for transaction-by- transaction customization
    • Other Forms of Price Flexing Price promotion  Sales, incentive pricing  Retailers began forward- buying or diverting product  Every Day Low Pricing (EDLP) is reducing the use of price promotion Couponing  Free-standing inserts (in newspapers)  Point of purchase
    • Other Forms of Price Flexing Pricing for different segments  Geographic segments • Different prices in different zones  Usage segments • Different prices for high volume users  Demographic segments • Different prices for students, children, etc.  Time segments • On- and off-season rates
    • Geographic Pricing Policies FOB Uniform DeliveredPricing Pricing Zone Basing-PointPricing Pricing
    • Geographic Pricing Policies FOB Basing-Point Pricing Pricing Zone Uniform Delivered Pricing Pricing Using freight absorption pricing (FOB - Free On Board) the seller pays or absorbs the transportation charges
    • Geographic Pricing Policies FOB Basing-Point Pricing Pricing Zone Uniform Delivered Pricing Pricing Using zone pricing all consumers in the same zone pay the same transportation charge
    • Geographic Pricing Policies FOB Basing-Point Pricing Pricing Zone Uniform Delivered Pricing Pricing Using basing-point pricing, all freight costs are priced as if they originated from the same basing point
    • Geographic Pricing Policies FOB Basing-Point Pricing Pricing Zone Uniform Delivered Pricing Pricing Using uniform delivered pricing all consumers pay the same transportation charges (average shipping expense to all customers)
    • Pricing Policies Prestige PricingLoss-Leader Odd-Even Pricing Pricing Product Line Pricing
    • Pricing Policies Prestige Pricing Loss-Leader Odd-Even Pricing Pricing Product Line Pricing Pricing at relatively high levels so as to convey an image of high quality or exclusivity
    • Pricing Policies Prestige Pricing Loss-Leader Odd-Even Pricing Pricing Product Line Pricing Pricing policy which offers products at prices below or near cost to attract consumers from competitors’ stores
    • Pricing Policies Prestige Pricing Loss-Leader Odd-Even Pricing Pricing Product Line Pricing Price lining is producing or marketing multiple products at different price points Bundling is marketing two or more products in a single package for a special price
    • Pricing Policies Prestige Pricing Loss-Leader Odd-Even Pricing Pricing Product Line Pricing Odd pricing refers to a price ending with an odd number just under a round number Even pricing is used to convey high quality