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kotler_mm13e_media_14.ppt
- 2. Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 14-2
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?
- 3. Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 14-3
Gillette Commands a
Price Premium
- 4. Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 14-4
Synonyms for Price
• Rent
• Tuition
• Fee
• Fare
• Rate
• Toll
• Premium
• Honorarium
• Special assessment
• Bribe
• Dues
• Salary
• Commission
• Wage
• Tax
- 5. Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 14-5
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 occasion
- 6. Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 14-6
Consumer Psychology
and Pricing
Reference Prices
Price-quality inferences
Price endings
Price cues
- 7. Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 14-7
Table 14.1 Possible Consumer
Reference Prices
• “Fair price”
• Typical price
• Last price paid
• Upper-bound price
• Lower-bound price
• Competitor prices
• Expected future
price
• Usual discounted
price
- 8. Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 14-8
Table 14.2 Consumer Perceptions vs.
Reality for Cars
Overvalued Brands
• Land Rover
• Kia
• Volkswagen
• Volvo
• Mercedes
Undervalued Brands
• Mercury
• Infiniti
• Buick
• Lincoln
• Chrysler
- 9. Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 14-9
Tiffany’s
Price-Quality Relationship
- 10. Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 14-10
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 price
- 11. Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 14-11
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 stores
- 12. Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 14-12
Steps in Setting Price
Select the price objective
Determine demand
Estimate costs
Analyze competitor price mix
Select pricing method
Select final price
- 13. Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 14-13
Step 1: Selecting the Pricing Objective
• Survival
• Maximum current
profit
• Maximum market
share
• Maximum market
skimming
• Product-quality
leadership
- 14. Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 14-14
Step 2: Determining Demand
Price Sensitivity
Estimating
Demand Curves
Price Elasticity
of Demand
- 15. Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 14-15
Figure 14.2 Inelastic
and Elastic Demand
- 16. Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 14-16
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 product
- 17. Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 14-17
Step 3: Estimating Costs
Types of Costs
Target Costing
Accumulated
Production
Activity-Based
Cost Accounting
- 18. Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 14-18
Cost Terms and Production
• Fixed costs
• Variable costs
• Total costs
• Average cost
• Cost at different
levels of
production
- 19. Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 14-19
Figure 14.4 Cost per Unit as a
Function of Accumulated Production
- 20. Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 14-20
9 Lives Uses Target Costing
- 21. Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 14-21
Step 5: Selecting a Pricing Method
• Markup pricing
• Target-return pricing
• Perceived-value
pricing
• Value pricing
• Going-rate pricing
• Auction-type pricing
- 22. Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 14-22
Figure 14.6 Break-Even Chart
- 23. Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 14-23
Auction-Type Pricing
English auctions
Dutch auctions
Sealed-bid auctions
- 24. Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 14-24
Step 6: Selecting the Final Price
• Impact of other
marketing activities
• Company pricing
policies
• Gain-and-risk sharing
pricing
• Impact of price on
other parties
- 25. Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 14-25
Price-Adaptation Strategies
Geographical Pricing
Discounts/Allowances
Differentiated Pricing
Promotional Pricing
- 26. Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 14-26
Price-Adaptation Strategies
Countertrade
• Barter
• Compensation deal
• Buyback
arrangement
• Offset
Discounts/ Allowances
• Cash discount
• Quantity discount
• Functional discount
• Seasonal discount
• Allowance
- 27. Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 14-27
Promotional Pricing Tactics
• Loss-leader pricing
• Special-event pricing
• Cash rebates
• Low-interest financing
• Longer payment terms
• Warranties and service
contracts
• Psychological
discounting
- 28. Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 14-28
Differentiated Pricing
• Customer-segment
pricing
• Product-form pricing
• Image pricing
• Channel pricing
• Location pricing
• Time pricing
• Yield pricing
- 29. Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 14-29
Table 14.6 Profits Before and After a
Price Increase
- 30. Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 14-30
Increasing Prices
Delayed quotation pricing
Escalator clauses
Unbundling
Reduction of discounts
- 31. Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 14-31
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 line
- 32. Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 14-32
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.
- 33. Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 14-33
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?